Looking to select the best software for the new lease accounting standards? Due to the tight compliance timelines and complex lease information, this decision can be a difficult one to conquer.
To choose the right software for your business, you’ll have to evaluate the features, functionality, and capabilities offered by different lease accounting software providers. In addition, it’s equally important to take a look at the overall value you will receive for the cost.
When you select the right (or wrong) software solution, it has a significant impact on your business. There are specific ROI benefits that you will receive. This article will cover what you should look for when evaluating the value and price of a lease accounting software solution.
Get ready for the next step with this helpful guide: How to Implement Lease Accounting Technology: Steps to Ensure a Smooth Transition to ASC 842/IFRS 16
Not all software for the new lease accounting standards are created equally – and costs can vary pretty significantly. However, the best lease accounting software does not mean it is always the most expensive.
Two main things you want your lease accounting software to support are:
- To streamline your organization’s lease portfolio management, and
- To seamlessly generate accurate financial calculations.
Just about every lease accounting tool can perform calculations on your lease data and send journal entries to your GL. But how do you determine the value of that system?
What is the value of lease accounting software?
The immediate, necessary value of enterprise lease accounting software is having the ability to perform calculations on your lease data and send journal entries to your GL, which can get you to compliance.
However, the entire lease accounting compliance effort (not just the software) can cost your company so much more than the cost of software. When you choose the best lease accounting software, you’ll get so much more for your money than a tool that can perform calculations to become compliant with the new lease accounting standards.
Three ways you can benefit from a valuable lease accounting software are:
- Improving efficiency and productivity
- Mitigate costly errors and eliminate risks
- Overall cost savings and better financial decisions
1. How does lease accounting software improve efficiency and productivity?
The best lease accounting software uses smart, intuitive system design to eliminate manual processes, therefore making it easy to accomplish tasks quickly.
Improving employee productivity is a KPI for just about every organization, regardless of size or industry. If your lease accounting tool is cumbersome and complicated to use, it will slow people down and hinder their work.
To test the time-saving value of a lease accounting software, consider the following:
- Does the system allow you to enter data once and use it throughout the system (rather than entering the same thing in multiple places)?
- Does the system support mass updates to different groups of assets, such as based on entity, country, brand, or asset class?
- Does the system support configurable alerts based on asset profile, or based on user groups?
- Does the system accept updates to master data in the administrative settings (such as GL codes), rather than having to pay for a vendor CR each time?
These 4 areas are just some of the key areas that impact how quickly and easily you can accomplish what you need to within your lease accounting software.
2. How does lease accounting software mitigate costly errors and risks?
The costly risks that lease accounting software should help reduce are two-fold. First, inaccurate financial reports can cause you to fail an audit, which in itself is a huge risk. Second, there’s a very high financial risk associated with a poorly managed leased portfolio.
If you’re not getting integrated lease management capabilities along with your lease accounting tool, you’re missing an important opportunity to reduce costs – from an audit perspective, as well as in general for your leases. When you’re shopping for lease accounting software, it’s essential to include a lease administration software comparison as well.
A couple of examples of how you can improve your lease portfolio management are:
- Lease options. For real estate leases, renewal options are critical. If you miss the chance to renew at favorable terms, you could be on the hook for millions… for a period of several years. When important lease dates approach, the best enterprise lease accounting software will alert those who need to take action.
- Validating payments. When accounting is not integrated with lease administration, leases expire and the payments keep going out. Or, variable payments are miscalculated. Or, lease options change and the payments don’t. All of these mistakes add up to more money than you might imagine. The best lease accounting software validates all payments according to the current lease terms in the system, and sends that information to AP to prevent overpayments.
The best lease accounting software is a comprehensive lease management platform that helps you take control of your leased portfolio and ALL associated costs.
3. Does lease accounting software help you make better leasing decisions?
With virtually all leases being brought onto the balance sheet, organizations (and their audit partners) are taking a much closer look at leasing decisions. Can the lease accounting tool you’re considering help you make the most cost-effective choices?
For that, you need a central repository of ALL your lease data.
That’s why the most valuable enterprise lease accounting software aggregates data for real estate, equipment, vehicles, land, and anything else your organization leases. It also should collect information used in the day-to-day administration of your leases, not just the payment amounts and dates.
For data to inform your decision-making, you’ll also need powerful and flexible reporting and business intelligence tools. Look for the ability to roll up, drill down into the details, and produce ad-hoc reports that slice and dice your data exactly how you need it.
Lease accounting tip: The ability to see side-by-side calculations for a lease according to the different standards (FASB ASC 840 vs ASC 842, for example) can be a valuable tool for decision making. Only the best lease accounting software offers this feature along with the ability to do hypothetical calculations.
Once you understand the value you can expect to get from the best lease accounting software, the next question is, when can you expect to get that value? Some systems take much longer to implement and produce ROI than others.
If you’ve implemented an IWMS, you know what we mean. It can take years to get the full leasing platform in place and operational. You can bolt on a lease accounting tool that just does the calculations more quickly, but then you’ll be missing out on the lease management value mentioned earlier.
The best lease accounting software provides a complete, end-to-end solution with fast implementation: 30 days or less for software implementation and data migration.
What’s the true cost of lease accounting software?
Now that you understand how to compare value, it’s much easier to do a cost/benefit analysis of lease accounting solutions. However, there’s one more important point to consider: how are you calculating cost?
Remember that cost includes more than the price of the software. Don’t forget to factor in additional costs such as:
- Technology implementation: Does the vendor outsource software implementation and systems integration? How much extra will you have to pay for that if you need to hire consultants?
- Lease abstraction: Getting lease data out of old systems and paper documents can be the most costly and time-consuming part of the FASB and IFRS compliance process. The best lease accounting software providers offer this service. If your software vendor doesn’t and you’re forced to use consultants, you may pay extra to migrate abstracted data into your new system.
- Customizations: Have you ever bought software that worked just as you wanted right out of the box? Every organization needs customizations to adapt software to their terminology, processes and structure. Will you have to pay consultants to do that, too? Or it is easy to customize the software yourself?
Now you’ve got a much more complete picture for comparing lease accounting tools. When you look at the true cost of software along with the value you can expect to get in return, choosing the best lease accounting software becomes a whole lot easier!