In our last blog post, we discussed the importance of understanding the true costs associated with owning business hardware. Once you are cognisant of your hardware’s total cost of ownership, you are better equipped to make the difficult decision between making a CapEx purchase or subscribing to a solution provided as-a-Service. In order to help you make an informed decision, here are some of the advantages and disadvantages associated with an outright purchase and with a monthly as-a-Service subscription.
Advantages of Purchasing POS Hardware
Purchasing is easy to do – you decide what you want, then go out and buy it. The most obvious advantage of buying hardware is that you gain ownership of whatever devices you purchase. There are also some tax incentives to purchasing equipment. Section 179 of the Internal Revenue Code allows you to fully deduct the cost of some newly purchased assets in the first year. Although not all equipment purchases are eligible for Section 179 incentives, you can still receive tax savings for almost any business equipment through depreciation deductions.
Disadvantages of Purchasing Hardware
The biggest disadvantage is the upfront capital expense. For some businesses, purchasing hardware is a huge burden that may not even be an option because the capital outlay is so high. Even if you try to finance the equipment, you typically have to front a sizeable (typically 20%) down payment. Doing so will tie up lines of credit and you may have restrictions placed on your business for future operational needs until that loan is paid off. Although owning has some advantages, the largest disadvantage to buying the hardware is that you will eventually get stuck with old equipment that could be technologically obsolete by the time it is paid off.
Advantages of as-a-Service for POS Hardware
The biggest advantage to any solution provided as-a-Service is that there is little to no upfront capital expense or property tax. You are also subscribing to a guaranteed outcome and predictable monthly cost, increasing the stability of your business. The as-a-Service model allows you to keep up with technological advancements and competition instead of being stuck with old, outdated equipment. Unlike a lease, which usually requires credit approval and a UCC filing, no credit is exposed or used in the subscription scenario. Additionally, with a subscription, you won’t be left on the hook when your equipment becomes obsolete or breaks as you would be with a financing solution. The genius of an as-a-Service hardware solution is that it is guaranteed to work everyday and if something goes wrong, the issue will be corrected or the device replaced.
Disadvantages of as-a-Service for Hardware
If you do not take into account the total cost of ownership, subscribing will seem more expensive in the long term. A disadvantage of as-a-Service is that you don’t own the equipment, so you will not build equity in it. Depending on the terms, you may have to make payments for the entire subscribed period, even if you no longer need the equipment, which can happen if some aspect of your business changes.
Make the Decision
The difficult decision between purchase and as-a-Service comes down to two things: your requirements for your POS solution and the amount of capital outlay you have available. In the case of hardware, if your equipment requirements are small and you have the money or can get a low interest loan, just buy it. On the flip side, if your business needs require a substantial amount of equipment (such as several lanes of point of sale (POS) systems), subscribing to a solution is likely a much better option. There is really no need to tie up a large amount of cash, especially when you could use that money to gain a foothold in your industry or grow your business. Ultimately, your business infrastructure, objectives, and capital will typically guide you in one direction or the other.
Bottom line – before you make a decision, take your time and ask yourself the right questions. And if you don’t know what questions to ask, contact Accucode, a successful provider of as-a-Service solutions for over 20 years.
Brandon Grant
Director, Business Development & Partnerships
Accucode
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