A + V

Subscription-based AV systems – does it pay to finance them from the opex budget?

2020 | november

Subscription-based AV systems – does it pay to finance them from the opex budget?

Broadly speaking, each company incurs two types of costs: capital expenditures (capex) and operating expenses (opex). Capital expenditures are related to the implementation of new projects, such as furnishing a new office. They include, e.g. design, construction and upgrade works, purchase of devices and equipment. Operating expenses usually include day-to-day costs of running and using the office, such as cleaning expenses, utility bills, and software licenses.

Firms frequently need to grapple with very tight project budgets. Typically, the cost of AV infrastructure is included in the capex budget, which means that if the budget is exceeded during the implementation, the client has to opt out of certain functionalities of the AV system in order to fit in the budget earmarked for entire project.

However, there is a solution to this problem: a lease or its specific form – long-term rental financed from the opex budget.

A lease is financing combined with purchase of AV equipment after the end of the lease term. There are two lease types: operating lease and financial lease. Long-term rental is actually also a lease – operating lease to be precise – except that usually at the end of the lease term the equipment is not purchased but is returned to the financing party.

For this reason, rather than finance the entire value of AV devices at once, the user will just have to pay monthly rentals, spreading the cost over time. In addition, the rental agreement can cover all additional expenses related to the project, i.e. not only the purchase of new devices, but also the cost of their provision, assembly, installation and commissioning, as well the the cost related software, training services, and ongoing maintenance of AV systems (under an SLA, for example).

After the end of the lease term, the user has two options – buy the devices used so far (paying the difference between their market value and the rentals paid to date) or replace the devices with new ones and start another lease. In the case of AV/IT systems, the latter solution is more advantageous financially. On average, AV/IT equipment loses 75% of its value after two years and 90% after three years of use. Regular equipment upgrades are cheaper and help the firm keep up-to-date with technology advancements.

Once you have decided to use that particular form of financing, all you need to do is approach the appropriate AV integrator who will make a suitable project financing offer and take care of all formalities. As a result, the user avoids many hours of filling in documents and dealing with banks and leasing institutions.

A+V can finance, deliver, deploy and provide full maintenance of a professional AV infrastructure.