How NFPs can get the latest technology without breaking the bank
In this digital age, a not-for-profit (NFP) is unlikely to achieve its mission without frequently updated technology. To engage with stakeholders effectively and work flexibly and efficiently, workers need up-to-date smart phones, tablets and laptops – and all the latest software to run on them.
Previously, in the bid to run ‘lean’ operations, NFPs have tended to under-capitalise on IT infrastructure, with staff limping along on older, often donated, second-hand technology. But, today, the phenomenal pace of change means that hardware is becoming obsolete in the space of two or three years.
For an NFP board, this is a quandary. Equipping even a small workforce with essential technology can run to hundreds of thousands of dollars. That’s a big chunk of fundraising proceeds – especially if it has to be paid out every three years in an IT refresh.
Also, such frequent updates add to the administrative burden. At one end of the lifecycle, someone needs to procure, deploy, set up, train staff in and support the new technology. At the other end, all that equipment needs to be decommissioned, wiped clean for security reasons and disposed of.
Few NFPs have staff with the time or the capabilities to take on these additional tasks.
Nick Beverley, Business Development Manager in Macquarie Equipment Finance, specialises in advising NFPs on how best to finance IT and other equipment. He believes boards should consider funding options before undertaking massive capital investment in IT.
“A lot of the NFPs don’t realise there are funding options out there for technology and office equipment. These options mean you don’t have to pay cash for computers or other devices upfront. Instead, you pay a small, set amount each month for a three or four-year term. When that time is up, your finance company collects the obsolete technology and, if appropriate, replaces it with new equipment under a new agreement.”
He says the financial and productivity benefits can be compelling.
With the right IT finance solution, you avoid big capital outlays and your equipment is replaced on a regular basis as its working life reduces.
Lower cost of capital equipment
Imagine an NFP that needs to equip its staff with 20 laptops and 20 desktops. The cost of buying those devices new might be $100,000. Instead of paying that upfront, the NFP can spread this computer cost over time by taking out an operating lease on the same equipment. Over a three-year term, the NFP’s total lease payments could end up being less than its planned capital outlay.
Beverley points out the price difference is because, at the end of those three years, the NFP wouldn’t own the equipment. But asks: “Would you really want to? These days, that equipment is largely obsolete. It’s out of warranty and has a very low resale value.”
He says that, under most leasing agreements, NFPs will always have the option of holding onto their old equipment if they still need it. “If you want to keep some or all of your old devices, perhaps to donate to your clients, you can usually buy them at market value from your finance provider.”
Frees up capital for other purposes
Beverley says directors with corporate experience are often reluctant to use equipment funding options because they’re used to depreciating assets on the balance sheet for tax purposes.
“But, an NFP’s tax-free status makes this strategy redundant. There’s no benefit to keeping assets on the balance sheet. NFP boards are better off spreading the cost of technology over time and investing capital to support their mission – not their infrastructure. Leasing improves cash flow and gives the NFP certainty over the cost of IT equipment.”
Flexible end-of-life options
He advises boards to look for finance solutions with flexibility at the end of the term.
“Equipment finance should work around your organisational needs. You may need a few more months to figure out the best technology to get next – or you may decide to leave the refresh for another year. Make sure you have the option of keeping the equipment for an extended period at a lower cost. Your provider should tailor the agreement to suit you – not them.”
Easy upgrade path
Leasing also takes the administrative burden out of technology upgrades. Beverley says, for a nominal additional monthly fee wrapped into the lease agreement, finance providers should be able to run the whole refresh process end-to-end on the organisation’s behalf, helping with:
- procurement – putting boards in touch with trusted partners who will give them a good deal on the equipment
- deployment – preparing, configuring, imaging and testing the new equipment, to help users to get started
- in-use assistance – offering outsourced IT support, including an online asset management system
- disposal – collecting and decommissioning old equipment.
He believes that expensing technology over time is the best way for NFPs to provide their stakeholders with cutting edge services and communication.
“With the right IT finance solution, you avoid big capital outlays and your equipment is replaced on a regular basis as its working life reduces, making sure your staff continue to have access to new technology and modern solutions.”
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