Boosting Sales In Challenging Times The Impact Of Pay Per Use Financing

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In the era of rapid change in manufacturing finance, the concept of Pay-per-Use Equipment Finance is emerging. It is changing the conventional models of financing and allowing businesses to have unprecedented flexibility. Linxfour is in the forefront of this new revolution by leveraging Industrial IoT in order to create a new era of finance that benefits both equipment manufacturers and operators. We explore the intricacies of Pay per Utilization financing, its effect on sales during difficult times, and how it transforms accounting practices, shifting from CAPEX to OPEX which allows for the elimination of the balance sheet treatment that is required as per IFRS16. For more information, click Equipment as a service


Pay-per Use Financing: It’s a Powerful At its heart, Pay per Use financing for equipment used in manufacturing is a game changer. Businesses pay according to the actual use of equipment instead of fixed and rigid payments. Linxfour’s Industrial IoT integration ensures accurate monitoring of usage, ensuring transparency and eliminating hidden costs or penalties if the equipment is not utilized. This approach is innovative and allows more flexibility in managing cash flow, which is critical during times of low customer demand is fluctuating and revenue is low.

The impact on sales and business Conditions There is a general consensus that Pay per use financing has great potential. A staggering 94% think that this type of financing can increase sales even in challenging economic conditions. The ability to directly match costs with the amount of equipment used not only attracts companies looking to improve their spending but also creates an appealing environment for manufacturers that can offer more appealing financing options for their customers.

Accounting Transformation: Shifting from CAPEX to OPEX One of the primary distinctions between conventional leasing and Pay-per-Use financing is in the realm of accounting. With Pay-per-Use, companies undergo a radical change in their accounting practices, shifting from capital expenses (CAPEX) to operating costs (OPEX). This is a major impact on financial reporting as it offers a more accurate picture of revenue-related costs.

Unlocking Off-Balance Sheet Treatment under IFRS16 The introduction of Pay-per use financing also brings forth a strategic benefit in terms of off-balance sheet treatment a critical consideration under the International Financial Reporting Standard 16 (IFRS16). In transforming the costs of financing equipment companies can take these obligations off their balance sheet. This is not just a way to reduce the amount of financial leverage, but it also eliminates barriers to investment, making it an attractive choice for businesses that want an agile financial structure.

Intensifying KPIs and TCO in the event of under-utilization In addition to the off balance sheet management, the Pay-per-Use model contributes to enhancing important performance indicators (KPIs) like free cash flow as well as the Total Cost of Ownership (TCO), especially in cases of under-utilization. If equipment is not meeting the anticipated usage rates traditional lease models could be problematic. Pay-per-Use lets businesses stay away from paying fixed sums for assets that are not being utilized. This can improve their overall performance and financial performance.

The Future of Manufacturing Finance Innovative financing strategies like Pay-per-Use help businesses navigate the complexity of an economic landscape that is constantly evolving. They also help pave the way for a new economy that is more flexible and resilient. Linxfour’s Industrial IoT approach benefits not only manufacturers and equipment operators as well, but it also aligns with the current trend of companies seeking more flexible and sustainable financing options.
Conclusion: The integration of Pay-per Use financing along with the accounting transition from CAPEX into OPEX, and the off-balance sheet treatment under IFRS16 is an important shift in manufacturing finance. Businesses are striving for cost-effectiveness and financial agility. The adoption of this unique finance model is essential to keep up with the times.

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