Leasing has become a smart way for businesses to access the latest technology and equipment without the need for a large capital outlay. Not only does this help businesses better manage their capital allocation but leasing also allows companies to focus on their core business while the lessor manages end-of-lease activities such as decommissioning and e-wasting devices or getting them ready for a useful “second life”. On the surface, leasing is a prudent financial decision for a business, but the benefits span wider, especially in the manufacturing industry. Keep reading to learn how leasing positively impacts the manufacturing industry through driving sustainability and economic growth.
Businesses can’t go a day without being reminded of the importance of environmental, social and corporate governance (ESG). With sustainability and ESG reporting becoming mandated across many jurisdictions, it’s critical for businesses to find measurable ways to reduce their environmental footprint, especially in manufacturing. The way in which goods are produced, from where and how materials are sourced to a factory’s ESG practices, impact the sustainability of an organisation.
Leasing is an effective way to introduce a more sustainable approach to manufacturing. As a resource-intensive process the equipment and machinery used in the manufacturing process is often in high use. This impacts energy consumption across the manufacturing value chain, from material extraction to product packaging. By upgrading equipment on a proactive basis, manufacturing machinery can be used at its most economical point in energy consumption and intensity. As a result, companies in the manufacturing sector that lease equipment and upgrade before technology obsolescence arises can continuously improve their energy consumption.
Leasing gives manufacturing companies access to the equipment and machinery they need without a down payment (which is required when companies take out a bank loan). No down payment means that companies have more capital available to invest in other areas of business growth, such as research and development, expanding to new markets, or growing the company’s team. As a result, this delivers further economic growth that filters down the supply chain, from freight companies that move products through to the businesses that sell them.
Vendor finance is a smart way for companies to better manage their equipment throughout the asset lifecycle. By engaging a vendor finance expert who understands your company’s equipment requirements, usage and maintenance are managed more efficiently. Proactive management throughout the lease term might including making changes to machinery locations (swapping high- and low-use machinery) and updating maintenance schedules accordingly. And with usage and maintenance activities aligned with the lease term, manufacturing companies ensure their production is as efficient as possible without sacrificing cash flow and working capital. Adding a lease management and accounting system to the process, such as Quadrent’s lease accounting software solution (LOIS) also makes IFRS 16 compliance simple while helping companies to build up a wealth of lease management data that can later be analysed to make better commercial decisions.
Quadrent works with organisations helping them access assets without sacrificing cash flow and addressing their ESG risk in the process. With a team that has in-depth leasing knowledge and specialised accounting backgrounds, we’ll help you get the most value out of your assets while addressing growing ESG requirements and reporting expectations.
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