By Kim Tjoa and Egbert Willekes
Over the last few years, the sharing economy has gained immense popularity and is projected to create an even bigger impact in the near future. Not only consumers can join this movement. Quite frankly, the success of businesses will start to be characterized by the more efficient use of company assets through sharing. Why? Because there are three significant advantages to asset sharing that are hard to pass up. Businesses improve their sustainable impact, enhance their social position and reap major financial benefits.
Financial benefits? Definitely. Companies are able to save costs when they rent or borrow from each other instead of making investments when purchasing equipment or hiring personnel. Additionally, they are able to generate additional income by (temporarily) renting out assets. Let’s take a closer look at the financial benefits that asset sharing brings for any business or organization
1. Impact on cash flow
When you share your underutilized equipment, personnel, facilities or services, your business will benefit from an additional operation cash flow, created by the rental or sales of the assets that aren’t optimally being used. If you choose to use assets from colleague businesses, you will lessen your capital expenditure, leaving you with a larger cash flow for alternative investments.
2. Impact on income statement
When you share your assets, your business will also benefit from an additional line item on your income statement: “revenue from underutilized assets.” But that’s not all. When you engage in the sharing of assets with fellow businesses, you will need less capital, expenditure, which will result in reduced depreciation of fixed assets. The rent for using shared assets will be much lower than the corresponding depreciation.
3. Impact on balance sheet
Sharing your company assets will also lead to a smaller risk of the impairment of your assets, as sharing leads to higher future cash flows from the rental or sales of these assets.
Positive impact on the cash flow? Check. Positive impact on the income statement? Check. Positive impact on the balance sheet? Check. Asset sharing creates better financial ratios and leaves more room for other investments. Starting a new business without big investments? It’s possible with asset sharing. Even better, no big investments are needed to get asset sharing off the ground within your organization. Think about it …
Just like all major changes, the switch to asset sharing will not be easy. The management team has to be on board, and an organization has to be ready, willing and know how to embrace this new addition to their business. It will be the task of, for instance, procurement or facility managers to think along with the executives, advise them and implement it into the core business. Want to learn more about how your facility management department can join the movement? Check out in this article.
Image credit: FLOOW2
Kim Tjoa is co-founder of FLOOW2 World’s Reset Button, the leading sharing marketplace for businesses and organizations.
Egbert Willekes is lecturer Finance for the International Financial Management & Control (IFMC) program at The Haque University of Applied Sciences.