The five pit falls of investment
Entrepreneurs often invest in matters like new staff, the purchase of new real estate, equipment and the remodeling or renovation of a building. Many entrepreneurs can risk falling in one or more of the five following pitfalls.
Pitfall 1: financing with own means
With an increasing cash flow, an entrepreneur is often tempted to make investments with their own capital. With the potential consequence that there isn’t enough money for overhead expenses such as salary, pension, rent etc. Because the investment is deducted over five years, the deductibility, and with that, the fiscal advantage is also divided over five years as is the decrease in taxes. This has an impact on your cash flow of the year the investment was made.
Pitfall 2: The VAT
It is important that you include the VAT when investing. The VAT may not be deductible for entrepreneurs. The VAT is part of the investment that is deducted over five years.
Pitfall 3: Compare and negotiate
Let’s be honest, whoever reads the fine print? However, for the quotation of an investment, this is essential. In addition, it is important to ask the question what you really need before you request the quotation. If you do not do that. The suppliers will determine what they offer in the quotation and not what you need. Make an overview of the quotations of several suppliers and negotiate the price. There is a good chance that there is some financial wiggle room.
Pitfall 4: Financing
After you have decided to invest, the next question is; how are you going to finance it? As mentioned above, it is not advisable to do so with your own capital. Your other options are a supplier lease, a bank loan, an acquaintance loan a lease through a leasing company. You will have several options depending on the type of investment. Take the time to look at all your options in regards to conditions and price. The price is the interest rate with the administration and mediation fees.
Pitfall 5: Advisable?
First, ask yourself whether or not the investment is truly necessary. Determine what advantage the investment brings, especially in the case of replacement or renovation. Sometimes it is better to postpone, equipment that is brand new this year can be a lot less expense the following. Also, pay attention to fiscal rules in regards to new staff and if you are still allowed to go into the city with your (company) car due to new regulations regarding environment and sustainability.