There is power within your lease portfolio. Over the last year, public and private businesses have taken a closer look at their leases – and experienced the downstream benefits of lease optimization. Businesses who must comply with the new lease accounting standards (e.g., FASB ASC 842) are now examining their leases with a higher level of scrutiny than ever before. Additionally, over the last year, companies looked to their leases to reduce the financial impact of COVID-19. In return, these businesses have experienced operational benefits associated with lease optimization.
What is lease optimization?
Optimizing your lease portfolio means:
- Having a controlled inventory of all lease documentation that is updated to account for all changes and modifications.
- The ability to capture, monitor and act on all critical lease dates, including end of-term options.
- Ensuring changes in lease terms are reflected in payment schedules and lease accounting disclosure reports.
- Conducting regular audits of your leases and the underlying assets by taking stock of your portfolio and identifying gaps and opportunities.
Lease optimization allows your business to uncover savings, streamline lease accounting compliance and accommodate pivotal business needs with agility.
Identify cost-saving opportunities
Over the last year, businesses looking to cut excess business expenses were increasingly mindful of their leases, given leases are the second largest business expense besides payroll. Lease optimization helps organizations identify areas of their leases where they are overspending – and save money through visibility into that data.
Real customer lease optimization examples
Here are some examples of how Visual Lease has helped hundreds of customers save money through lease optimization. Before partnering with us:
- A large manufacturing company lost $105k because they did not realize that their lessor was continuing to bill expenses for surrendered property.
- One of the largest insurance companies in the US lost $185k because they didn’t realize their landlord needed to offset operating expense increases against tax decreases.
- A national bank lost $500k because the tenant forgot to request reimbursement for tenant improvements from the landlord.
- A large tech company lost $210k because the tenant was not aware that tax abatements were not being added back to the base tax amount.
These are examples that with the right information, perspective and tools in hand, lease optimization can be leveraged to materially improve business processes and generate savings in a previously undermanaged area of an organization.
Capture modifications and adjustments that impact lease accounting compliance
Leases change – and adjustments need to be tracked and evaluated under the new lease accounting standards (ASC 842, IFRS 16, GASB 87).
Determining whether a modification has taken place can be operationally challenging, particularly for companies with large lease portfolios or for organizations that do not have the systems and processes in place to properly handle and account for these events. This analysis is complicated and will most likely require a dedicated team and technology to ensure attention to detail.
That said, this is THE perfect time for you to take the extra steps towards optimizing your lease portfolio.
You need to feel confident throughout every stage of the lease accounting compliance journey:
- Day 1 – Compliance (centralizing leases and producing accurate reports)
- Day 2 – Sustainable Auditability (implementing processes and controls)
- Day 3 – Optimization (revisiting and bridging gaps)
Accommodate business needs with agility
Another positive of lease optimization is that it enables your business to pivot and identify emerging lease needs as your organization grows – or vice versa. Having the ability to access your leases in one centralized location – and report on your portfolio in any way helps you to identify the most effective way to scale your lease portfolio to meet your needs.