In today’s fast-paced business environment, lease accounting has become an increasingly complex task for organizations. Manual processes and outdated tools like Excel not only pose a high risk of errors but also result in rising audit fees. To address these challenges, companies are turning to lease accounting automation. In this blog post, we will explore the main reasons why lease accounting automation is crucial for businesses.
Rising Audit Fees
Auditing costs have been on the rise, driven by factors such as inflation, the impact of COVID-19, and company restructuring activities. According to a Gartner survey, a significant 62% of companies expect an increase in their audit fees. This upward trend in costs is directly linked to lease accounting.
Connection to Lease Accounting
Achieving and maintaining compliance with lease accounting standards, such as ASC 842, GASB 87, and IFRS 16, is a complex task. However, automation can significantly reduce the costs associated with lease accounting. By leveraging the power of automation, organizations can streamline their lease accounting processes and ensure compliance, leading to potential cost savings.
Impact on Audit Fees
Companies that automate at least 25% of their internal controls reported paying nearly 30% less in audit fees. This substantial reduction in costs can offset the annual expenses of lease accounting software subscriptions. By investing in the right lease accounting technology, businesses can realize significant financial benefits.
Risks of Manual Processes
Lease accounting involves intricate calculations, making it highly susceptible to human error. Relying on manual processes, especially tools like Excel, increases the risk of inaccuracies in lease accounting. To mitigate this risk, organizations need to embrace automation.
Consequences of Errors
Errors in lease reporting can have serious repercussions for businesses. A survey conducted among senior finance and accounting professionals revealed widespread concern about the potential for misreporting lease information. The main worries include increased audit fees and fines, potential damage to the company’s reputation, risk of legal action, and harm to personal professional reputation.
Benefits of Automation
Implementing the right lease accounting technology can mitigate risks, enhance operational efficiency, and lead to significant savings on audit costs. By automating lease accounting processes, organizations can ensure compliance with accounting standards, streamline their operations, and eliminate the risk of errors.
In conclusion, lease accounting automation is no longer just a luxury but a necessity for businesses in today’s complex financial landscape. By embracing automation, companies can reduce audit fees, mitigate risks, and ensure accurate and streamlined lease accounting. To stay ahead of the competition and navigate the challenges of lease accounting, organizations must invest in the right lease accounting technology.