How a serviced office benefits your balance sheet

Bálint Erényi at January 09, 2023

If you are working in finance and are responsible for keeping the balance sheet of your company in order, you already know that there are always two lines in every balance sheet which cover a big part of your expenses.

One of them is employee compensation and the other is financial necessity of providing a workspace for your employees and all that comes with it. 

One should steer away if possible from saving money on people, but it seems more and more likely that the traditional way of working and it’s costs that we are used to can and should be rethought. And the first of these ways that should be revisited is renting an office. Your balance sheet will thank you.

Let’s talk about numbers

Managing finances often feels like being asked to make or save money for the budget out of thin air. But saving money often comes with forced compromises and sacrificies.

That’s what changed in 2019, when IRFS 16 came into effect. It basically changed the way businesses have to register their leaseholds in their balance sheets.

But the true financial opportunity for saving your company some substantial amount of money is not in the rules of IRFS 16, but in the exceptions.

This technicality is that everyone should exploit if cares about balance sheet is that businesses are not required anymore to report leases that are shorten than 12 months with no purchase option.

Which office spaces work like this? Serviced offices. 

How does a serviced office help your balance sheet

When dealing with finances, flexibility and manoeuvrability always helps. When you think of operating expenses, summarize all the things that come with the upkeep of an office, from furniture to services. And if a company has it’s own office, naturally all these expenses go right into your balance sheet as amortization.

But a serviced office counts as a rent. And that, thanks to IRFS 16, is a gamechanger.

Because the math is simple. A summary of overall office costs in case of using a conventional office can amount to twice as much at the end of the day as opposed to renting one.

Just think of the above for example:

The services that come with an office like this have been handled by people whose expertise, network and long-time cooperation with service providers give them an edge. Thus making these offices financially more viable for you. And every balance sheet loves reduced service costs.

With the possibility of short and flexible lease terms comes the assurance that you will not get stuck in a rental obligation. While you could spend your time – meaning money – better or just spend that time at a better place. Therefore you won’t have to commit such a large amount of money right at the beginning.

In Budapest, obtaining a 1000 m2 office space for 100 colleagues for a 5-year period costs you around €2 million right out of the gate. This money is not an investment for you, it is a burden on for balance sheet. An assurance and a pretty good deal to whoever you’re paying it to.

But what’s more important is that the amount above does not include everything. Whereas at a serviced office you have usually one bill that covers it all.

Let’s continue using our 1000 m2 office as an example.

With a conventional office like that, depreciation on it’s own would cost around €5000 every month. Costs due to amortization at a serviced office are not coming out of your budget.

The cost of conventional office usage in most scenarios also doesn’t include utilities, cleaning and telco. So these are separate deals with different providers that you have to make. And we all know that a package deal is always better that going one by one. A serviced office knows that too, that’s why you get one bill only.

Maintenance is a constant struggle, as we all know it. The amount of money, energy and what’s most important, time that goes into upkeep could be definitely spent elsewhere.

balance sheet

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