22 Jan How Can Leasing Improve Your Company’s Cash Flow?
New start-up businesses usually have a common problem in maintaining positive net cash flows. This is particularly challenging due to the need for asset requisition at the start. Consequently, large amounts of capital is needed, leading to equally large amounts of liabilities. To avoid the headache of being trapped in a cash-strapped position, you should consider revaluating the importance of each asset. Additionally, sourcing for alternative methods of acquisition rather than out-right purchase may save you from spending valuable cash.
One of the best ways to ensure that your company’s net worth is stable is to avoid purchasing large capital intensive assets, which are not yet needed by the business. This is especially so if you do not foresee a high return on investment for the asset in the future. In this article, we will focus the on benefits of truck rental services Singapore, as opposed to purchasing a company owned vehicle.
- It grants you greater financial flexibility to undertake other operations
The key issue at stake here is the high amount of upfront cost that your new start-up will have to sink in to purchase a truck. Consequently, this negatively affects your firm’s liquity and endangers it should your firm run into cash flow problems. Given that start-ups face high amounts of volatility, it is crucial to build in buffer cash to cover for foreseeable contingencies.
- Greater operational flexibility
With most new businesses, the demand for services may fluctuate greatly, making it difficult to forecast capability required. As such, many business owners end up purchasing excess capacity to combat this issue. This unfortunately, creates extra maintenance and operation costs. Instead, truck rental provides a much more flexible option, allowing you to rent more capacity during peak season. Additionally, you get to avoid maintenance cost when demand is relatively lower.
- There will be no depreciation of the vehicle on your balance sheet.
Every asset that your firm owns will suffer from depreciation. This results in diminishing value of the asset that reflects the forecasted wear and tear that it experiences. As such, the truck that you purchase today, will not be merely worth as much in a year’s time. From another point of view, the value of the money that you spent in acquiring the asset will be worth less in the future.
- The costs are fixed.
Most truck rental agreements include fixed fees, making it relatively easy for budgeting in future terms. This creates stability for your firm’s cash flow, and places less stress on your finance department to forecast future events.
In this article, we have covered four key benefits for commercial vehicle rental sg over purchase. If you still have doubts, do not hesitate to speak to vehicle rental companies to find out more.