Law firms are no exception. Many organizations are competing for a limited number of services, which drives prices up even further. In fact, overhead expenses — such as support staff compensation, knowledge management and library services — have all grown at modest rates, while technology spending is up by 8% — one of the fastest growths the Law Firm Financial Index (LFFI) has tracked since 2014.
Fortunately, there is a way to counter some of those spending increases — leasing and financing.
LOCKING IN RATES AS COSTS INCREASE
As the Federal Reserve increases borrowing rates to combat inflation, leasing the equipment your business needs may make more sense than ever.
Primarily, leasing means fixed — not adjustable — monthly payments, converting a firm’s equipment and project costs into an affordable monthly expense. As rates increase, leasing and financing lock an organization into lower rates, saving the firm money over time. Leasing allows the firm the flexibility to reset and order required technology and equipment, providing time for the supply chain strain to ease.
Leasing means no down payment, leaving more cash available to move to better-performing investment options that should follow the Federal Reserve rate increases. Leasing also requires smaller, fixed monthly payments to help guard your cash flow if your money borrowed with a variable rate of interest becomes more costly. Material residuals invested into laptops and other hardware also help to decrease the cost of equipment that has a limited lifespan.
INCREASE YOUR OPTIONS AND PURCHASING POWER
Banks are in the process of cutting back some of their lines of credit as a response to the economy. Some firms may be in for a surprise, but an independent lessor may have access to a variety of bank funding types and can use those choices to create the best financial solution that aligns with the firm’s business objectives.
Inflation reduces purchasing power over time. A key selling point of financing is that it affords clients the opportunity to pay for equipment in future dollars using current interest rates, whose value would be reduced by the effects of inflation, creating an effective hedge against inflation.
Equipment leases follow fixed monthly payments (in dollar amounts or in percentages), shielding law firms from currency fluctuations and market inflation.
MATCH PAYMENTS TO USEFUL LIFE
Leasing and financing help ensure the firm has the right technology for the right amount of time and can be customized to match payments to its useful life. Technology is now mission critical to your firm’s efficient and productive delivery of legal services. With these positive changes in the use of technology come certain challenges:
- Law firms are faced with increasing pressures from both corporate and private clients when it comes to cybersecurity and proof of an asset management system or strategy.
- Decreasing the useful life of the technology and equipment the firms have come to rely on to compete, adapt and succeed means refreshing the fleet more often, which can be operationally challenging.
As part of the solution, your firm should put together a workable disposition plan combined with a technology refresh mechanism that will protect the firm from keeping outdated equipment in use that doesn’t adhere to new and increasingly high-security standards. A refresh cycle — tailored to the firm’s needs — streamlines operations and keeps the firm on a fixed monthly payment while ensuring attorneys’ devices are up to date.