We're pleased to share this blog post from our partners at First American Equipment Finance.
By Christina Floyd & Karen Leastman | First American Equipment Finance
Law firms rely on software to provide critical opportunities to leap ahead, enhance client services, and maximize productivity for the firm. However, a software upgrade can be a complex project – often with several milestones and vendors, that monopolizes resources, leading to drained budgets or worse, reluctance to implement new technologies.
The challenge for law firms to benefit from the latest software is finding a strategy to harness this power of technology, while also managing the costs of such projects to ensure they don’t interfere with partner distributions and growth initiatives. Software financing allows firms to embrace new technologies, while simplifying payments, staying within budget and strategically advancing the firm.
Why Finance Software?
Technology resources continue to be a growing expense for law firms. The increased cost of technology is tied to software expenses, which can easily reach six and even seven figures. Implementations often involve huge upfront consulting fees, training requirements, and ongoing expenditures.
Financing allows firms to spread the cost of software over the useful life of its application. With complex software implementations, financing gives firms the ability to streamline multiple vendors into one simple monthly payment and receive low fixed rates. Choosing to finance preserves cash for strategic growth initiatives, while maintaining partner distribution.
Software leases typically take one of two forms. Law firm executives should choose the lease structure that best aligns with their objectives:
- Capital lease: Software is booked as an asset, subject to depreciation as if the law firm paid cash. Monthly capital lease payments are fixed and spread out over the lease term. At the end of the lease, firms will have the right to use the software with no further financial obligation. (Although considering the speed of software development, it may be time for another update.)
- Tax lease: Lease payments are treated as business expenses, which can be written off for taxes. Tax lease payments tend to be lower than capital lease payments, as they do not lead to outright ownership. At the end of a tax lease, firms typically can elect to either purchase the right of use of the software or continue leasing.
What Can Be Financed?
With proficient software, firms can share information faster, store and find records with ease, and keep track of time and accounts with greater precision. Firms can finance every stage of the project, and the entirety including hard and soft costs.
Commonly financed software includes:
- Accounting software
- Time & billing software
- Document management systems
- Annual subscriptions/renewals
- Implementation & consulting fees
When Can It Be Financed?
Financing can be utilized throughout each stage of the software project:
- Start-Up: Subscription & licensing fees
- Strategy: Consultation services
- Build-out: Development costs
- Go Live: Implementation & training costs
- On-going support – managed services fees
In short, software investments are strategic investments that help law firms make the most of their human resources. Financing is a way for firms to realize the full potential of their software without sacrificing growth or partner distributions.
To learn more about software leasing for law firms, please visit First American Equipment Finance at www.faef.com/legal.