25 May Pitfalls of purchasing capital equipment

The Pitfalls of Purchasing Capital Equipment

Let’s face it, Franking machines, Copiers, Printers and IT equipment are not exactly the most exciting subjects, particularly if you have been tasked with the purchasing role. But they can be quite costly, and involve a long term working relationship with the supplier, so great care needs to be taken when choosing a preferred partner and payment method.

In many organisations the buying process is normally initiated by a person within middle management who has an influence or interest in these types of products.  Very often though these people get wrapped up in the “cutting edge technology” or the politics of implementation and don’t pay as much attention to the detail in the contracts as perhaps they should do.

The result is often a more costly experience than initially anticipated, bad feelings and prolonged and often expensive negotiations at the end of the contract.

It’s regrettable that many of our competitors rely on onerous contracts to retain customers rather than good old fashioned high quality service at a reasonable price.

Are you really on top of your legal commitments and obligations?

Here is an example of one of the traps that could be so easily avoided. ……Please go and ask the person who is responsible for your capital equipment contracts “have they got a diary note for when the contracts end”.  Then, and as equally important, ask them “have they got a note of when they need to give notice of cancellation”? The lease if you have one and support agreement will probably have different termination terms, they could even have different periods, so irrespective of whether you are blissfully happy with your current supplier you should be aware of your contractual obligations as it only takes a couple of bad instances for that relationship to become questionable, then what?…you need to consider the options.

If you are tangled up in an onerous contract you may not get a choice, or if you do, it may be a very expensive one!

So its good practice to give notice of cancellation even if you intend to stay with your current supplier and then find out what is required to avoid termination fees in the support agreement and plan your future steps.  The very worst that can happen, is that it keeps your incumbent supplier on their toes and stops them becoming complacent.

Now for the detail!

We would hope that you or your purchasing person has taken the time to read the small print in both the leasing and support agreements, if not you could be in for some nasty surprises.

Is your leasing agreement a “Minimum” term agreement or a “Fixed“ term agreement?  Most agreements are probably now Minimum term agreements, which means that notice has to be served before the minimum period ends otherwise it will simply continue to run at the same rental value until you do. That could be very expensive and unnecessary! It could also mean that you have some residual value tagged on to the end that you could also be liable for but will probably know nothing about.

Your support agreement probably has even more surprises, rather unpleasant ones, shrouded in legal jargon, topped up with smoke and mirrors. Regrettably there are probably too many to go into here.

Newman  can help you though.  We can point out the clauses you need to be aware of and help you create a strategy to work around them; we will even produce a cash flow forecast that provides a visual explanation of your exact position.

Whilst we cannot magic away legally applicable penalty clauses we can advise you how to avoid these pitfalls in the future.  Then when the time is right, we hope you will allow us the opportunity to introduce you to fair and clear contracts and a quality of service you probably haven’t experienced before in our industry.

By the way, we don’t charge for this advice, nor is there any sort of commitment; all that we ask for is an opportunity to help you at some stage in the future, when the time is right. We just hope you enjoy our professional approach and wish to do business with us.

Take action now as the timing could be crucial, if you want help please call us on 01892 664155 or email info@newmanbs.co.uk