How do I avoid Deferred Maintenance? What is it and why do I want to avoid it?
Deferred Maintenance is a very real cost you incurred – you just didn’t spend money on it yet. For example, your house. Your roof started leaking and you didn’t notice. You’ll soon have to fix the roof and any other damage.
In the computer world, Deferred Maintenance is an easy trap to fall into. Everything is working so why mess with it.
Each piece of obsolete hardware or software will eventually stop you like quicksand. Let’s say we’re running Windows 7. I’m looking at a Customer Management tool built for Windows 10. But I bought my accounting software years ago before Windows 10 even existed, so I can’t upgrade anything until I upgrade that. Untying that knot takes time and money. All that postponed spending, will eventually come due…maybe all at once. And your business is stuck until you unwind it all.
This is where the difference between Capital Expenses (CAPEX) and Operating Expenses (OPEX) comes in. Operating Expenses are simple. You pay the electric bill every month. Capital Expenses are sneakier. You buy a computer today and you figure you’re done for a while, but at some point you need to budget a replacement. Good CPAs are good at this and they’ll be thrilled to talk to you about business planning and not just your taxes.
In our next couple of videos, we’ll talk about how often to refresh your hardware and software to avoid deferred maintenance.
Episode #6 – 12/18/2018