Purchase | Advantages and disadvantages

Buying is still the most common method for companies to acquire business supplies such as office furniture. Rental, leasing or pay-per-use payment models currently play a subordinate role. In most cases, "purchase" is automatically selected when a company chooses new office furniture; there is rarely an explicit discussion as to whether this is the right form of acquisition for the planned use.

Purchase as a form of acquisition - legal and tax implications

Legal implication

In the case of a purchase, ownership of an item is transferred to the buyer against payment. As a rule, the buyer can freely dispose of and use the purchased item (in our case, office furniture), but typically also bears all risks after the purchase that are not covered by a warranty, such as loss due to theft and natural disasters or the risk of gradual wear and tear.

Tax implications

The items purchased for business use (in our case, telephone and meeting boxes) must be recognised as fixed assets and depreciated over the planned useful life. The depreciation tables applicable in Germany stipulate a useful life of 13 years for office furniture (see the so-called "depreciation table for generally usable fixed assets" at https://www.bundesfinanzministerium.de/Web/DE/Themen/Steuern/Steuerverwaltungu-Steuerrecht/Betriebspruefung/AfA_Tabellen/afa_tabellen.html.

Implications for cash flow

When buying, payment is usually made immediately in full. This may sound somewhat obvious and trivial, but it is a significant difference to renting or leasing.

Note: This means that although the purchase amount is due immediately at the time of purchase, the expenditure cannot be claimed as an expense for tax purposes immediately but (in Germany) is spread over 13 years!

These arrangements make sense in many cases - after all, office furniture such as our telephone and meeting boxes are durable and intended for many years of use. However, there are also situations in which a purchase is not necessarily the ideal form of acquisition.

Alternatives to buying

It is particularly worth considering alternatives to buying in the following cases:

• Cash flow optimisation: The payment is to be made over a longer period of time in order to minimise the liquidity requirement.
• Useful life shorter than 13 years: If it is already clear that the planned useful life of the office furniture could be shorter or even considerably shorter than 13 years, leasing and renting may be interesting alternatives. Examples:
  • A company needs meeting boxes for offices that are only to be used temporarily for two years until the planned move to a larger new building.
  • The lease for the office space expires in four years, and it is unclear whether the urgently needed telephone and meeting boxes can still be used after that.
• P&L optimisation: For companies that are strongly orientated towards the capital market or the interests of investors, renting and leasing offer other possibilities in terms of business management: monthly rental and leasing instalments are classed as operating expenses and, in contrast to purchasing, do not tie up any capital ("asset-light").
• TestEspecially with relatively new office concepts such as meeting and telephone boxes, companies are often unsure how well they will be accepted and used by employees. Here we offer an interesting alternative to buying with our FLEX rental programme.

Overview: Buying, renting and leasing at Ninety-Nine Cubes