The new ASC 842 and IFRS 16 lease accounting standards require significantly more assets and liabilities to appear on the balance sheet. In fact, these standards specify more than 40 different types of data that must be tracked to do the required calculations. Manually keeping track of these data points is prone to error and leaves you vulnerable to risk, but with lease accounting software, you can streamline this complicated process.

Lease accounting software is a product specially designed to automate the reporting process for the new standards – GASB 87, ASC 842 and IFRS 16. This software provides tools to input and report on all the financial aspects of leases to meet the new compliance requirements. To do this, lease accounting software gathers detailed information about a rental contract, such as payment frequencies, rent formulas and discount rates, and then performs critical accounting calculations. This automates the process of adding information to the balance sheet, including ROU assets, interest expenses, liabilities, practical expedients and other elements required under FASB, GASB and IASB guidance.

By using a central database combined with a solution that automates the process, lease accounting software can more efficiently help large and small businesses achieve compliance with these new standards while mitigating risk.

The new lease accounting standards add to the complexity of reporting on assets and liabilities. The standards add real estate and equipment lease requirements and change how leases are classified, which in turn affects how leases are calculated.

Without a lease accounting solution to help with lease tracking, reporting and management, your business may be exposed to a number of risks including:

• Inconsistencies in the way assets are accounted for
• Human error in calculations or in migrating data from one source to another
• Widely dispersed lease records rather than a central data repository
• Lack of visibility into lease terms, changes and important dates
• Missing details such as embedded leases that are part of larger contracts
• Lack of a structured change management process
• Mistakes in complex calculations for common area maintenance (CAM) and other costs
• No record of what changes have been made to leases, when and by whom
• Increased odds of failing an audit

The best lease accounting software addresses all these risks and more. It puts a secure system in place for capturing all the necessary data, tracking changes and reporting lease costs in accordance with your accounting policies and procedures as well as with ASC, GASB or IFRS requirements.

Get more details in our blog: Lease accounting auditing risks multiply without software.

There are many reasons to adopt a lease accounting software solution for your business, but the three most essential benefits combined can help your business grow, prosper and protect it from risk.

Benefit 1: Improved productivity and efficiency

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 solution, 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 four areas are just some of the key factors that impact how quickly and easily you can accomplish what you need to within your lease accounting software.

Benefit 2: Make better leasing decisions with lease accounting software

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.

Benefit 3: Mitigate costly errors and risks

Lease accounting software can help reduce risk in two ways. First, inaccurate financial reports can cause you to fail an audit, which in itself is a huge risk. With lease accounting software’s centralized data and reporting, these risks can be mitigated. Second, lease management software (also called lease controller software) can help reduce the high financial risk that comes with a poorly managed leased portfolio.