Reducing costs associated with your workplace.

Let's face it, most businesses today are looking for a way to cut costs while improving profitability. And when it comes to the workplace, there are certain costs that are unavoidable. For example, most businesses must have computers, office furniture, a phone system and other basics.

Companies today are increasingly aware that the costs incurred in the purchasing process are often greater than the price of the product itself. For example, the cost to a company buying a computer is more than the purchase price of the object. There are also costs incurred in time spent selecting the appropriate product, purchasing the product, installation, training time for employees, maintenance and repair over the life of the product, upgrading costs and possibly disposal costs. All of these factor into the "cost of ownership" - what it costs to own this product. This is also referred to as life-cycle costing.

The cost of owning office furniture is very similar. There are several factors that enter into this equation: the costs of planning and design, the costs of the selection process and purchasing activities; the costs of delivery and installation; the costs of running wiring and cabling for technology needs; the costs of orientation and training; the costs of move management and reconfiguration; the costs of refurbishing maintenance; storage of excess furniture; and the costs of disposal.

Several services are available to help you reduce costs and manage furniture investments. For example, financing alternatives, remanufactured furniture and furniture management can help impact your bottom line and free up your time to run your business.

Financing Alternatives

Let's say you need to purchase to workstations - a $125,000 project when you factor in wiring/cabling, design and installation. However you only have $100,000 in your budget. With financing, this same furniture could be leased for $2,400 per month on a five-year Fair Market Value lens. Leasing makes it possible for you to acquire the furniture you need within your budget constraints and save the $100,000 for generating profit for your business.

Not only can leasing help you avoid tying up working capital, it also can eliminate annual budget constraints, assist companies that need to restrict debt on their books and provide potential tax advantages. The decision to lease versus buy depends on several factors, including a company's financial goals, growth and business conditions.

Using working capital to make a purchase means that cash is not generating a profit. In addition, a cash outlay may reduce a company's investment options, drain cash reserves and potentially limit growth. However, an outright purchase does provide the buyer with direct ownership, depreciation benefits and no finance charges.

Leasing allows buyers to use cash for profit-generating investment opportunities by conserving capital. It also offers ownership at the end of the lease, provides tax advantages and reserves bank credit lines for other capital expenditures. A lease agreement can be 100 percent financed, makes it easy to add on future leases and is flexible, with many options available. The following are three types of common leasing options:

True Lease: Provides the lowest possible monthly payments. At the end of the lease, the customer can purchase the furniture at fair market value, renew the lease, or return the furniture to the lending group.

Ten Percent Option Lease: Offers low monthly payments. At the end of the lease, the customer can purchase the product for 10 percent of the original equipment cost.

Purchase: Offers the depreciation and tax benefits associated with ownership. At the end of the lease term, the furniture is purchased for $1.

Remanufactured Furniture

Remanufactured furniture refers to office furniture that has been completely repaired, rebuilt and finished off with new fabrics and paints, and is available for 20 to 40 percent less than new office furniture. The remanufacturing process involves rebuilding the furniture with new parts, new electrical systems and high-quality, new surface materials. Another important feature is that remanufactured furniture offers warranties and Underwriters Laboratories (U.L.) listings that are comparable to new products.

Remanufactured furniture should not be confused with "refurbished" furniture. Refurbished furniture involves only a "makeover" of the existing furniture, with just minor repairs and new paints or fabrics.

In addition, many remanufacturers offer service programs that help customers manage their changing furniture needs. Some of the more popular programs include:

Banking: Allows you to bank or store excess furniture at the remanufacturer's warehouse. When you need to withdraw furniture, you are issued a list price credit that you can use to purchase the furniture you need. Some remanufacturers even allow you to apply these credits toward new furniture.

Exchange: Provides the option of exchanging existing furniture for remanufactured or new furniture. This option can be particularly useful for companies that are moving to a new location and can't experience any downtime. Newly remanufactured furniture can be installed in the new location while employees continue working in the existing location. Once the new space is ready, employees can move in without any loss of work time and the old furniture from the previous location can be exchanged for a list price credit.

Buy Back: Offers cash back for the current market value of your existing furniture when you are ready to sell it.

Furniture Management

The process of re-engineering has revealed the advantage of outsourcing non-core competencies to resources who can provide the necessary services in a more cost-effective way. Allowing an outside group to manage your furniture needs also provides time for you to focus on managing your core business.

Furniture management services can include inventory of existing furniture, reconfiguration of furniture in existing space, installation, coordinating moves to new office space, training on how to use/adjust furniture, and disposal of furniture at the end of the life cycle.

A single point of contact can coordinate all of these services for maximum effectiveness and cost-efficiencies. A two-stage process helps this relationship to run smoothly: First, a furniture management group will identify the activities necessary to manage your furniture assets and calculate the real and total cost of those functions. A proposal would be presented for reducing costs by streamlining or redesigning those processes. Second is the implementation of a service delivery process. A furniture management partner should provide you with carefully controlled processes and data to track these activities, automation of certain furniture management functions, consistent quality of service and measurement against continuous improvement targets, which are based on customer satisfaction. Also there is potential for lower overall costs related to furniture management.

It is important to realize that large investments for your workplace need to be managed just like other parts of your business. Services, like financing alternatives, remanufactured furniture and furniture management, can help you incorporate the best furniture solutions into your workplace at a cost level that you are comfortable with, and a furniture management plan that allows you to save time and money.