Most financial institutes and accounting firms have transitioned to tech-savvy tools and software solutions. Some take advantage of automated bookkeeping, whereas others have centralized their database with lease management software.
Despite being a new invention in the finance world, lease management software is doing wonders for businesses. After all, the growing complexity and volume of leases that an organization handle is spiking.
Today’s organizations have to manage different aspects of lease agreements that include real estate, equipment, and vehicle leases. Managing all this data while ensuring timely rentals often becomes overwhelming for companies, but that is where lease management software comes in handy.
The automated tool can streamline the lease cycle from contract creation to lease termination.
Further, accountants can enhance the organization’s financial visibility by consolidating the lease data. It will enable them to prepare comprehensive reports and share them with the investors.
That way, shareholders can understand their financial obligations and make more informed decisions regarding future leasing options. If you want to know more about this, keep reading.
Here we have highlighted five essential benefits of lease accounting software.
- Ensures Compliance
Today, every financial firm must comply with international accounting standards (IAS) and international financial reporting standards (IFRS). In addition, firms located in the United States must abide by the principles set by Governmental Accounting Standards Board (GASB).
With multiple regulatory bodies and governing regulations, ensuring compliance becomes challenging for most businesses. Here, lease management software can be super valuable.
The software can recognize lease assets and liabilities under the accounting body that your business follows. For instance, if you comply with GASB, the system will record all transactions under ASC 842 – the lease accounting standard.
Similarly, you can use GASB 87 lease accounting software for lease classification. It can bifurcate the short- and long-term leases based on the lease tenure.
Furthermore, the software can assist with subsequent measurement and disclosures. Once the lease liability has been calculated, you must amortize it using the effective interest method. In addition, this must be disclosed under the notes section of your financial statements.
Fortunately, the software knows such requirements, helping businesses ensure compliance.
- Enhances Financial Reporting
Truthfully, financial reporting is critical to lease management since it impacts the company’s financial performance. A lease management software provides a centralized database comprising all real-time data of leased assets.
It includes lease contracts, payment terms, termination dates, and modifications. With real-time access to data, accountants can access the most up-to-date information and make financial reports accordingly.
Moreover, many lease software solutions have built-in reporting tools and customizable dashboards. That way, financial analysts can tailor their analysis to specific requirements, highlighting lease-related metrics and similar performance indicators.
These reports can benefit the management, allowing them to allocate resources accordingly.
- Fosters Collaboration
Today’s savvy lease management software solutions foster collaboration, allowing multiple users to work together on lease-oriented projects. It promotes teamwork and coordination across various departments, ensuring all employees are on the same page.
Collaborative features of this software can also facilitate communication through internal messaging systems within the lease records. That way, team members can exchange information, share updates, and ask lease questions.
Quick access to records and data can streamline tasks while eliminating the need for separate communication lines.
Besides this, all changes made to the lease records get updated in real-time. It means those changes are reflected across the forum whenever someone modifies the contract or payment terms.
It enables all authorized users to see the updated information, ensuring everyone is current on crucial tasks.
- Streamlines Lease Life Cycle Management
Believe it or not, managing leased assets is no cakewalk. It requires end-to-end tracking from when the lease was initiated to its termination. Accountants must perform every step accurately to ensure compliance with all regulatory bodies.
However, doing this manually can be time-consuming and arduous, so why not seek help from a lease management software?
Here is how lease software can streamline the leased assets’ life cycle.
- First, the lease management software simplifies the lease initiation process. Users only input essential lease details like lease terms, rental rates, classifications, etc. After that, the software offers pre-defined templates that best fit the data inputted into the system.
- The software comprises customizable approval workflows that route lease contracts to designated stakeholders for approval. It also sends notifications and reminders informing participants about pending approvals to speed up the process.
- Businesses often miss out on their lease payments since they don’t receive any reminders. Luckily this software can automate the entire payment schedules and reminders. It can track due dates and send notifications to lessees for timely payments.
- Lastly, the software accommodates all lease terms and agreement changes due to mutual consent or business requirements.
- Facilitates FS Audits
Most entrepreneurs hesitate to audit because of their inaccurate record-keeping practices. Lease management software can play a massive role in facilitating financial statement (FS) audits. Similar to how it updates lease data in real-time, it maintains an audit trail that records all changes made to the lease record.
These records also contain the information of users who made the changes and when. Thus, auditors can access comprehensive history of lease data modifications, promoting transparency during audits.
Further, the software’s control features can enable tracking of different iterations of lease documents. It allows auditors to access previous versions of audit documents and compare changes over time, providing a clear record of document editions.
Most importantly, lease software performs automated calculations under the relevant accounting standard. It ensures the accuracy of lease-related financial data, helping businesses overcome the risk of manual errors.
Lease software can simplify the audit process by providing auditors with organized and accurate records. It also provides a secure platform for accessing lease data and documentation, speeding up the audit process.
Lease management software has been a game-changer for today’s businesses. It empowers them with better control over their lease portfolio, helping streamline workflows and operational processes.
It also ensures compliance with accounting standards, saving your company from hefty fines and penalties. Hence, leveraging lease management software has become a need of the hour for every business.
It is a way to optimize lease management practices, make data-driven decisions, and allocate business resources efficiently.