10 Things to Consider Before Choosing A Lease Accounting System

Choosing the right lease accounting software is a critical decision for all businesses. With so many options available, it’s important to evaluate the factors that matter most to your organization. Choosing the right software will save you time and money in the long run and increase ROI. In this article, we’ll discuss key considerations that will help you get everything you need from a lease accounting system.

Some accounting leaders may assume the easiest way to get the calculations they need is to purchase a simple standalone lease accounting tool and feed it with data from other systems or repositories (such as spreadsheets, or a lease management point solution).

That approach rarely proves as fast or easy as you expect. For one thing, your lease data probably resides in numerous systems: real estate may have their own point solution, procurement may have spreadsheets with IT equipment data, and many leased assets are still in a PDF on somebody’s computer! Aggregating all that information is complex and requires some manual intervention to ensure data integrity.

Benefits of a Unified Platform

Without all of the data residing in one place and serving as your “single source of truth,” you’ll face a time-consuming data validation process to ensure information is consistent and not duplicative. And don’t forget, you’ll need to repeat this process on Day 2 to ensure data is synced and your reporting is valid and accurate.

Selecting a single platform that performs both administrative and accounting functions can allow you to skip secondary data validation and ongoing integration costs. Don’t make the mistake of overlooking the long term benefits that a single system can provide:

• It can help you manage your policies with respect to options and contingent/variable rent obligations
• It can provide the strategic business intelligence needed to shape short and long term real estate decisions to support business needs while reducing occupancy expenses
• It can directly identify and correct costly payment mistakes.

The simplicity (or complexity) of getting your data into your chosen lease accounting tool is probably the biggest factor impacting how fast your company can make the transition to your new system. Before choosing a system, ask these questions to understand the process, resources and time required for this all-important task:

• Will you need to pay an external consultant to manage the process, or is the vendor willing and able to help you manage it?
• Does the vendor have enough lease expertise to help you manage data collection and abstraction? If consultants are needed, it’s important to understand total costs and project duration.
• Is data migration automated, manual or a hybrid?

Bulk-Upload Capabilities

It’s essential to have bulk-upload capabilities to speed the population of both quantitative and qualitative data. However, relying entirely on automated data entry, especially for complex real estate lease information, will result in data integrity problems. The system you choose should easily accommodate both manual and automated data entry, and the process must include quality checks throughout.

Does the vendor provide data migration tools and implementation instructions?

You should expect collecting and validating all your lease data to be challenging, but migrating it into the new system should be straightforward. Migration tools and clear implementation instructions show the vendor’s level of expertise with the process.

What kind of implementation support can you expect from your accounting partners?

Consider the support available from your vendor, accounting partners, and other advisors. Determine who will help with data collection, cleansing, migration, policy decisions, and implementation. Some companies also offer implementation services to reduce the burden on internal teams during the transition.

Every vendor says their product integrates with other systems. However, to be sure you’ll get the results you expect, it’s up to you to investigate the depth and details of the integration. You may want the data from your lease accounting system to feed multiple tools and enterprise systems.

Key Integration Capabilities

Many organizations (especially multinational organizations and those with multiple subsidiaries) will need the following integration capabilities:

• Ability to create journal entries, including multiple GLs
• Ability to integrate with common ERP and AP systems, such as SAP & Oracle
• Flexible APIs and XML capabilities for unique integrations
• Integration with modern communication platforms, from Outlook to Slack, for alerting users about critical events and actions
• Ability to feed business intelligence systems that provide high-level dashboards for the C-suite
• Ability to bolt onto an IWMS or lease administration system to add seamless lease accounting functionality to a legacy database

At the end of the day, you need your lease accounting system to provide essential reports with reliable data and accurate calculations. Equally important is the flexibility to customize reports to suit your organization’s needs. Having a system that allows you to generate and adjust reports without constantly relying on external support can save time and reduce costs.

Customizing and Analyzing Data

To get the most benefit from your lease accounting system, you’ll want the ability to easily “slice and dice” financial data in unlimited ways. We’re talking about customizing reports according to your terminology, reporting schedule and business practices. There are many situations where you’ll want the ability to easily create ad-hoc and drilldown reports, or make adjustments to predefined reports, such as

• Fiscal year or quarterly reports
• Drilling down into expense obligations by region, organization, cost center, asset type and other variables
• Performing currency conversion and analyses
• Evaluating KPIs and metrics for fixed assets

Being forced to lean on the vendor or a consultant every time you need an adjustment or new report will not only slow you down, but also add considerably to the cost of using the system.

Your lease data contains sensitive financial information, contractual terms, and sometimes personal information, all of which need to be protected from unauthorized access. A good lease accounting system should offer advanced data security features.

Crucial Data Security Features

When comparing lease management softwares consider security capabilities such as:

• Physical security of servers: Understand how and where infrastructure is protected.
• Data encryption: Look for protections for data during transmission and while at rest.
• User authentication: Multi-factor authentication and strong access controls can reduce unauthorized access.
• IP whitelisting: Organizations may require controls that limit access to approved IP addresses.
• User roles and permissions: The system should allow administrators to control who can access, view, or modify specific information.

If the platform uses AI, security questions become even more important.

Choosing software is not only about getting through implementation. You also need to understand how the platform will work after your organization goes live.

User Experience

At this stage of the game when you’re primarily concerned with getting data into and out of a lease accounting system, you may not take a close look at how easy (or difficult) it is to work within it. After you go live, this becomes a much bigger issue.

• Leases change regularly and need to be updated. How many screens will you have to wade through to find the field to modify?
• Is information entered once and used throughout, or entered in multiple places, resulting in data integrity problems?
• How easy is it to produce quarterly and annual reports?
• Will you need to hire experts or invest a lot of time and money in training every time you add new users?

Flexibility.

There’s no such thing as a cookie-cutter company. It’s virtually certain that you’ll want to make changes to any lease accounting system so that it operates according to the way you do business. At a minimum, you’ll want the system to accommodate your fiscal calendar and reporting schedule. You may work with multiple currencies. You may need to adjust interest rates depending on asset type, useful life or location, or have the ability to override global rules (related to discount rates or capital/operating lease tests, for example). How easy is it to make those changes? If those things are difficult or impossible, imagine what you’ll go through to make major changes to accommodate an acquisition or a reorganization. Easy configurability is not a nice-to-have, it’s a necessity

Audit Support.

During an audit, the last thing you want is to be scrambling to answer questions about how numbers were calculated and the details of policy decisions. Your lease accounting system should provide easy access to supporting data behind FASB quantitative and qualitative disclosures via drill-down capabilities.

Selecting lease accounting software is not just about finding a solution that works for today—it’s about choosing a platform that can grow with your business. Choosing a premium lease accounting software, like Visual Lease’s platform, ensures that your business can stay compliant with lease accounting standards, and have a more organized and efficient lease management system. Don’t rush the decision— consider these seven things and evaluate your options thoroughly to ensure the software you choose meets your current needs and future goals.

8. How the Platform Uses AI Lease Abstraction

As AI becomes part of lease accounting and administration technology, organizations should understand exactly what a vendor means when it says its platform uses AI.

AI lease abstraction can help organizations reduce the manual work involved in reviewing lease documents and extracting important information. However, not every AI-powered abstraction process works the same way.

Before choosing a platform, understand:

• What types of lease documents can be processed?
• Which lease terms and data points can the AI extract?
• How does extracted information move into the lease accounting system?
• How are complex clauses, tables, and other lease information handled?
• What happens when the system cannot confidently identify a data point?
• Can users review and correct extracted information?

AI capabilities should fit into your overall lease management process rather than operate as a disconnected feature.

9. How AI Lease Abstraction Accuracy Is Validated

Accuracy should be one of the most important considerations when evaluating AI lease abstraction.

Processing documents quickly provides limited value if your team must spend significant time identifying and correcting errors afterward. This is particularly important when extracted lease information will eventually support accounting, reporting, administration, or business decisions.

Ask potential vendors how they measure and validate AI lease abstraction accuracy.

Questions may include:

• How is accuracy tested?
• What validation process is applied to extracted information?
• How are exceptions identified and reviewed?
• How does the system handle complex or unusual leases?
• Is the AI continuously evaluated as documents and lease structures vary?
• What role does human lease expertise play in the validation process?

Visual Lease’s approach includes more than 40 intensive validations designed to evaluate extracted information before it becomes part of the broader lease data process.

Understanding a vendor’s validation methodology can give you a much clearer picture of what its accuracy claims actually mean.

10. How Your Data Is Protected When AI Is Used

Traditional software security requirements still apply when AI is introduced, but organizations should ask additional questions about how their information is handled by AI systems.

Lease documents can contain confidential financial, operational, and contractual information. Before allowing an AI system to process those documents, understand what happens to the information after it is uploaded.

Questions to ask include:

• Is customer data used to train the AI model?
• Where is lease information processed and stored?
• Which third-party AI technologies or infrastructure providers are involved?
• What contractual protections apply to customer data?
• How is access to lease information controlled?
• How does the vendor monitor and manage AI-related security risks?

These questions can be particularly important for IT, security, legal, and procurement stakeholders involved in the software evaluation process.

A vendor should be able to clearly explain how customer information is protected rather than simply stating that its AI is “secure.”

Choose a Lease Accounting System for Today’s and Tomorrow’s Needs

electing lease accounting software is not just about finding a solution that works today. It is about choosing a platform that can grow with your business and support your accounting, administration, reporting, data management, and technology requirements over time.

AI lease abstraction adds another consideration to that decision. Organizations should evaluate not only whether a platform offers AI, but also how the technology works, how accuracy is validated, how sensitive lease information is protected, and how AI-generated data fits into existing workflows.

Choosing a comprehensive lease accounting platform, such as Visual Lease’s platform, can help your business stay compliant with lease accounting standards while maintaining a more organized and efficient lease management process.

Take the time to evaluate these 10 considerations so you can choose a platform that meets both your current needs and your organization’s future goals.