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Tag Archives: business planning

Buy vs. lease: Business equipment edition

Erin Mirante0 Comment

Life presents us with many choices: paper or plastic, chocolate or vanilla, regular or decaf. For businesses, a common conundrum is buy or lease. You’ve probably faced this decision when considering office space or a location for your company’s production facilities. But the buy vs. lease quandary also comes into play with equipment.

Pride of ownership

Some business owners approach buying equipment like purchasing a car: “It’s mine; I’m committed to it and I’m going to do everything I can to familiarize myself with this asset and keep it in tip-top shape.” Yes, pride of ownership is still a thing.

If this is your philosophy, work to pass along that pride to employees. When you get staff members to buy in to the idea that this is your equipment and the success of the company depends on using and maintaining each asset properly, the business can obtain a great deal of long-term value from assets that are bought and paid for.

Of course, no “buy vs. lease” discussion is complete without mentioning taxes. The Tax Cuts and Jobs Act dramatically enhanced Section 179 expensing and first-year bonus depreciation for asset purchases. In fact, many businesses may be able to write off the full cost of most equipment in the year it’s purchased. On the downside, you’ll take a cash flow hit when buying an asset, and the tax benefits may be mitigated somewhat if you finance.

Fine things about flexibility

Many businesses lease their equipment for one simple reason: flexibility. From a cash flow perspective, you’re not laying down a major purchase amount or even a substantial down payment in most cases. And you’re not committed to an asset for an indefinite period — if you don’t like it, at least there’s an end date in sight.

Leasing also may be the better option if your company uses technologically advanced equipment that will get outdated relatively quickly. Think about the future of your business, too. If you’re planning to explore an expansion, merger or business transformation, you may be better off leasing equipment so you’ll have the flexibility to adapt it to your changing circumstances.

Last, leasing does have some tax breaks. Lease payments generally are tax deductible as “ordinary and necessary” business expenses, though annual deduction limits may apply.

Pros and cons

On a parting note, if you do lease assets this year and your company follows Generally Accepted Accounting Principles (GAAP), new accounting rules for leases take effect in 2020 for calendar-year private companies. Contact us for further information, as well as for any assistance you might need in weighing the pros and cons of buying vs. leasing business equipment.

© 2019

IT Controls: How to Keep Your Organization Safe

Pam Williams0 Comment

by Rebecca Lunn

As organizations become more and more reliant on technology, the risks around technology also continue to grow. Recently, we have heard on the news of large hospitals being attacked with ransomware, which encrypts files. Hackers then refuse to give the key to unlock the files unless a ransom is paid, typically in the form of bitcoin, which is more difficult to trace. Although these particular hackers were after sensitive patient data, other types of organizations should also be aware of this risk. For example, non-profits who have large databases of member or donor data may also appeal to these types of hackers. In the face of increasing risk, it is vital that organizations re-evaluate their IT controls. Strong IT controls consist of the following:

  • The Organization has an IT strategic planning and risk management process in place to support financial reporting requirements.
  • The Organization maintains reliable systems that include appropriate data backup and recovery processes. This includes not only backing up data, but testing the backup restoration process on a periodic basis.
  • Physical security and access to programs and data are appropriately controlled to prevent unauthorized use, modifications, damage or loss of data.
  • Program and system changes are appropriately managed to ensure that the application software adequately supports financial reporting objectives.

If your organization would like additional information about implementing or improving IT controls, please contact Langdon & Company LLP.

Rebecca [email protected] is an Audit Senior who works primarily with non-profit organizations.