When your customers or patients walk through the door of your practice, the first thing they’ll absorb is the practice layout, décor, and then the waiting area. Those first impressions are lasting, which makes it wise to invest in a fit-out that reflects the quality of your services and appeals to your patients.
When it comes to running a successful practice, there are a number of important issues to take into consideration. Aside from displaying a great selection of frames and looking after your patients, it is essential to have the right equipment and facilities.
The cost of installing state of the art equipment can vary dramatically depending on your specialisation – from several hundred dollars to many hundreds of thousands. While this may be a deterrent, equipment should be looked upon as an asset rather than a liability. That’s because it gives you the ability to improve the quality of treatment you give to your patients.
Before you make your equipment purchases, it is critical to understand the financing options available, how each of these options will impact your bottom line and therefore assist you to run a successful practice.
If you invest all your cash in your equipment… you may lose the opportunity to use your cash more efficiently
By choosing the appropriate financing method to suit your circumstances you may be able to maximise your financial return and leverage savings through various channels.
There are three common options for purchasing your equipment including; cash, chattel mortgage or asset purchase agreement, and financial lease.
Is Cash King?
They say that “cash is king” and if you buy something outright then you don’t need to worry about interest payments or complex tax implications. However, if you invest all your cash in your equipment, it will take a long time to recover that investment. In the mean time, you may lose the opportunity to use your cash more efficiently by investing in other growth assets.
Chattel Mortgage or Asset Purchase Agreement?
Chattel mortgages and asset purchase agreements are common financing arrangements. Essentially they mean that you purchase the equipment with the assistance of a financial institution and then pay back the loan over the period of the agreement.
As the equipment is used for professional purposes, you may be entitled to claim the interest payments on the agreement as a tax deduction, plus you can depreciate the value of the equipment for its lifetime. The exact depreciation amount claimed each year depends on your self assessment, tax advice and the chosen depreciation method.
A financial lease means that the finance company is the legal owner of the asset throughout the duration of the lease. However the lessee has control over the asset providing them the benefits and risks of (economic) ownership. Rather than claiming depreciation as an expense, the entire lease rental (principal and interest) becomes tax deductible.
What’s the Best Option For You?
To understand all your options and to enable you to make an informed decision it’s advisable to speak to a professional in the industry with experience in financing for the eyecare professionals.
Barry Lanesman from Investec Medical Finance is a registered dentist with private practice experience and over 20 years involvement in financing dental and medical practices. He has played a key role in the development of specialist finance for the ophthalmology and optometry professions. For information on Investec Medical Finance phone (AUS) 1300 131 141.
The information contained in this article (“Information”) is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the Information is accurate and opinions fair and reasonable, no warranties in this regard are provided. We recommend that you obtain independent financial and tax advice before making any decisions. The opinions expressed in this article are those of the author and do not necessarily reflect the opinions of Investec Bank (Australia) Limited or Toma Publishing Pty Ltd, the publisher of mivision.