Telephone Systems: CapEx Vs. OpEx

When it comes to the financial aspects of your telephone system, you have some interesting choices – CapEx – Capital Expense or OpEx – Operating Expense.

• CapEx is for large expenditures traditionally depreciated over time.
• OpEx is for writing off costs as incurred.

Traditional on-premise PBX Systems – CapEx?  You Bet!

When you have a PBX system on-site, you have some substantial financial commitments.

Before anything else, you have the expense of creating a controlled-environment location for the equipment AND the cost of trunk lines (connected to the “world.”)

Then, you have the actual cost of the equipment itself.  You are committing to a substantial fixed amount – the total cost of the equipment – which you can pay upfront, sign a contract for payments over time or lease.

1. If you pay upfront, you are out the cash and have to write off the cost as CapEx – over a period of years
2. If you sign a payment and pay over time, you will probably want to write off the cost over a period of years (again, this will be CapEx.)
3. You can lease and write off only the payments as they are made (OpEx)

Buying PBX equipment is NOT like buying a computer.  You can write off 100% of the cost of a computer IMMEDIATELY, with no problems.  PBX equipment doesn’t work that way.

The problem is, buying or even leasing equipment, encumbers your cash either immediately or over time for a BIG number.  The equipment will NOT be upgraded or updated unless you pay MORE to get changes made.

As time goes by, the equipment will almost certainly become obsolescent – less useful and outmoded – BEFORE the CapEx depreciation period is over.  You end up with “stuff” that has little or no value.

That means you will either have to limp along with hardware that doesn’t meet new and greater requirements OR at best get pennies on the dollar – or nothing – – for what you have and then have to dig up the money to buy MORE equipment.

Leasing doesn’t help  because virtually ALL leases are for a fixed amount with a penalty if you attempt to end your commitment before the term stipulated in your contract.

So, even if you CAN write off the lease payments as you make them (OpEx) you are STILL stuck with a vanishing asset.

Managed Cloud VOIP – OpEx from the Start and Automatically Upgraded

When you sign up for Managed Cloud VOIP, your only equipment costs are for actual devices, and those are usually leased – so they are OpEx.  Everything else is virtual, with NO huge costs.

1. That means ALL your expenditures are CapEx – written off immediately
2. You do NOT have the cost of creating/maintaining an environmentally protected “equipment room” – everything is, again, virtual
3. Any upgrades or enhancements to the operating system are automatic – the cloud is continuously update, so no “limping” along with less than state-of-the-art capability
4. You may have a contract period, but it is almost certainly LESS than the time over which purchased equipment could be depreciated/written off AND is not for the much higher number of the cost of the physical “back room stuff”
5. Since all devices are typically leased, upgrades and change-outs are NOT going to require huge amounts for changes – you simply swap out the equipment you have been using for newer models with – at the worst- some incremental increase based on much enhanced capability

The bottom line is the bottom line

• You only pay for what you are using
• You write off all Managed Cloud VOIP costs as incurred, NO depreciation
• You don’t end up with obsolete or less-than-useful equipment
• You don’t have the expense of a “PBX room”
• ALL your write-offs are for OpEx 

Loquantur provide state-of-the are Managed Cloud VOIP services to many small to medium sized companies and offers flexibility and white glove service to all.  Contact us at 800-527-9022 to learn more.