If your business has a large lease portfolio, managing it can become a nuisance. This is especially true if the fundamental lease activities like lease administration, sourcing, and accounting compliance are being carried out manually.
Failing to manage your leases effectively can lead to operational, legal, and financial repercussions. Your business may have to deal with overpayments, resource wastage, and unavailability of critical assets in the long run. Businesses must implement effective lease management strategies, including using smart technology for lease management. This is where lease management automation comes in.
While technology has brought a paradigm shift in all areas of a business, it has also empowered businesses to streamline the entire process of lease management, lease planning, and strategic decision-making. This article aims to highlight the importance of lease management automation for businesses and how these state-of-the-art systems can contribute to maximizing business efficiency and eliminating compliance-related challenges.
Lease Management Software: An Overview
Lease management software is a specialized software solution that deals with all aspects of corporate and commercial leases. While lease accounting and lease management software are believed to be the same, the features of lease management software greatly differ from stereotypical lease accounting software. Lease accounting tools may be limited to managing the financial aspects of various types of leases and lack the ability to handle the monthly closure process or changes in lease terms.
Enterprise lease management software like LeaseAccelerator streamlines the entire lease lifecycle starting from lease sourcing to lease administration, management, payment or renewal tracking, accounting, compliance, financial reporting, and end-of-term management. The beauty of these applications is that they can be easily customized and used by different types of enterprises, from startups to medium-sized businesses and large multinational organizations.
Benefits of Lease Management Automation for Businesses
Whether your business deals with a handful of financial or operating leases or has a large lease portfolio, the benefits of a lease management system can be far-reaching and profoundly impactful. Let’s take a look at some of the most remarkable benefits of automating lease management functions for enterprises:
- Data Accuracy
Maintaining accuracy and precision throughout the lease lifecycle is one of the biggest challenges businesses face. Lease management systems reduce or eliminate the need to input data manually into the system and prevent inconsistencies in transactions and lease renewals.
Apart from data entry, lease management software helps businesses calculate lease payments and create amortization schedules with ultimate precision. This not only helps minimize calculation errors but also reduces any inconsistencies in financial reporting. Additionally, automating lease management procedures means businesses can accurately track start and end dates for each lease and stay on top of their payment schedules and renewal deadlines.
- Ensures Compliance with Changing Accounting Standards
Lease accounting standards keep changing. With the latest updates in lease accounting standards like GASB 87, GASB 96, IFRS 16, and ASC 842, businesses now require a proper representation of lease liabilities and assets in annual financial reports.
The biggest advantage of implementing lease management software is that businesses no longer need to fret about complying with changing standards. Lease management systems accurately calculate and report lease assets and liabilities in annual reports. For this purpose, these state-of-the-art systems are integrated with accounting modules, and each transaction is appropriately posted to the main ledger to ensure the integrity of financial data. This helps businesses comply with lease accounting standards and avoid any financial or reputational repercussions in the long haul.
- Helps in Lease-Related Strategic Decision-Making
Among the most decisive stages for any business is identifying gaps in business efficiencies and determining the need for leasing assets to improve outcomes. This is where lease management software outshines basic lease accounting tools and ERP systems.
Through extensive lease vs. buy analysis, lease management software can assist businesses in making critical lease-related businesses and their effect on overall production cost and business performance in the long term. Businesses can assess the long-term benefits of each of these options, weigh the various costs associated with buying or leasing specific assets, and make a definite decision free of biased judgment.
- Easy Lease Initiation
The software provides access to a global lease marketplace with over 500 lessors who actively participate in your lease bidding process. Businesses can choose the best lease option that meets their specific operational needs. Once a lease is finalized, the system can automatically classify, validate, and attest leases. This helps in maintaining data integrity throughout your lease management procedures, including the representation of assets, validation of contracts, and tracking within the lease portfolio.
Furthermore, the top management and policymakers can apply various policies on each lease, such as incremental borrowing rates, structure of lease payments, initial lease periods, etc. These policies help businesses follow set rules and guidelines and manage their lease portfolio more effectively.
- Facilitates Financial Statement Audits
Financial audits can be disastrous if there is any discrepancy in financial transactions and the assets and liabilities mentioned in the balance sheet don’t correspond with other financial statements or journal entries. Besides, businesses often find it difficult to collect heaps of financial data and statements or make them available to auditors on their demand. This is why many small businesses hesitate to get their financial statements audited by a third party.
The good news is that with lease management software, businesses no longer have to worry about financial audits. Lease management software streamlines the entire auditing process by maintaining an automatic audit trail of lease records and any changes to the transactional data. Moreover, businesses can generate updated financial data on a single click. Since the entire lease process is automated, the chances of any data inconsistency are absolutely zero.
The broad spectrum of advantages that leasing management software provides for businesses is rather astounding. Thanks to technological advancement, businesses can now use SaaS-based lease management software and apps that enhance accessibility and ease of use. While there are many off-the-shelf lease management software available, make sure a lease management software can seamlessly integrate with any existing information systems like ERPs, SCM, accounting software, and other data-centered tools.