Until recently, many companies were not paying much attention to their property and asset leases beyond paying the bills. Leases were simply considered a cost of doing business, and managing lease terms and obligations was not a priority.
With the establishment of new lease accounting standards that take effect for private companies in 2021, and took effect for public companies in 2019, that mindset is changing fast. Lease management has now become an essential practice that impacts financial reporting and the bottom line.
What is lease management?
In a corporate or non-profit organization, lease management, or lease administration, means tracking and optimizing every aspect of your lease portfolio. Properly tracking leases (not only real estate but also technology, vehicles, and even assets you control as part of service agreements) can help you significantly reduce the expenses associated with leasing. We’re not talking about small changes here, but a chance to add millions to your bottom line.
Common lease management tasks
Lease management requires a coordinated effort between the various teams to perform a variety of tasks:
- Lease negotiation and decision making: Determining lease terms, structure, and length, as well as evaluating lease-versus-buy options.
- Lease tracking and administration: Monitoring renewals and option deadlines, managing operating expenses, and keeping lease records up to date.
- Lease accounting and compliance: Processing lease-related payments, recording journal entries, calculating right-of-use assets and liabilities, generating reports, and performing re-measurements when lease terms change.
Why is lease management important?
Lease management is critically important to ensure your business remains confident in sustaining lease accounting compliance.
- Ensures compliance with lease accounting standards: Supports ASC 842, IFRS 16, and GASB 87 requirements by accurately recording and reporting all lease modifications.
- Adapts to ever-changing lease terms: Captures updates when businesses renegotiate contracts, add new locations, or terminate leases early.
- Centralizes lease data: Provides a single source of truth for all lease records, improving visibility and accessibility across teams.
- Improves financial accuracy: Helps track payments, calculate right-of-use assets and lease liabilities, and prepare audit-ready documentation.
- Reduces risk and missed deadlines: Monitors critical dates to avoid penalties, overpayments, and compliance gaps.
- Supports better decision-making: Delivers insights to optimize space utilization, manage costs, and plan for renewals or expansions.
Understanding the lease management process
The lease management process flow covers from initial planning through lease execution, administration, and termination or renewal. Each phase plays a critical role in ensuring operational efficiency, financial accuracy, and compliance with lease accounting standards such as ASC 842, IFRS 16, and GASB 87.
1- Pre-Lease activities
- Market Research: Identify suitable properties that align with business needs and financial parameters.
- Tenant Screening (for landlords): Evaluate potential tenants’ financial stability and leasing history.
- Lease Drafting: Outline key terms and responsibilities in a lease agreement, preparing it for legal review and execution.
2- Lease execution
- Contract Signing: Landlords and tenants formally execute the lease.
- Legal Review: Verify compliance with internal policies and external regulations.
- Security Deposit Collection: Ensure financial commitments are secured before occupancy begins.
3- Lease administration and tracking
- Centralized Lease Data: Organize lease details in a lease management system for transparency and easy access.
- Rent and Expense Tracking: Automate and monitor payments, ensuring alignment with contractual obligations.
- Critical Date Management: Track renewals, expirations, and option deadlines to avoid missed opportunities or penalties.
4- Lease accounting and compliance
- Expense Management and Invoicing: Allocate costs accurately and generate documentation for audits.
- Regulatory Compliance: Maintain alignment with ASC 842, IFRS 16, and GASB 87 through built-in compliance tools.
- Audit Preparedness: Conduct periodic reviews and maintain an audit trail of all lease activities.
5- Lease expiry, renewal, or termination
- End-of-Term Management: Prepare properties for handover or renewal by tracking timelines and obligations.
- Renewal Negotiations: Use lease performance insights to inform discussions and optimize outcomes.
- New Lease Planning: Begin sourcing and evaluating new properties to meet upcoming needs.
How can you optimize your lease management process?
Optimizing your lease management process starts with building a solid operational foundation. That means centralizing lease data, standardizing workflows, and leveraging automation through purpose-built lease management software. A structured approach allows organizations to reduce risk, improve collaboration across departments, and maintain full compliance with lease accounting standards.
Step 1: Centralize lease data and management tools
For teams to work together on lease tracking, the first step is to gather all lease data in a central repository that creates a single source of truth as well as an audit trail for all lease decisions and changes.
To set your teams up for effective lease management process flow, choose a lease management software platform (like Visual Lease) that allows you to centralize all ALL data related to lease contracts and provides tools for automating lease tracking tasks and auditing expenses.
When everyone managing leased assets is using the same system to update lease data, schedule payments, and create accounting journal entries, everyone is always working with the most current data. And you eliminate data integrity problems that can occur when data is moved between systems.
Step 2: Develop leasing policies
With centralized tracking tools and technology in place, you can now analyze your lease data and find out which leases are working well and which are costing you more money than you realized. Use those insights to determine how you want to standardize leasing decisions across the organization.
Best practice is for financial leaders to work with lease negotiators, administrators, and accountants to understand current practices and to establish cost-effective policies for leasing.
Step 3: Create lease requisition and update processes
To ensure your accounting team always has accurate lease information to feed balance sheets and financial reports, it’s essential to establish standard practices for every group that’s involved in acquiring and maintaining leases, including processing new leases, documenting lease changes, and handling lease terminations.
Step 4: Set up controls
Adding leases to the balance sheet has increased the complexity of financial reporting. That means more oversight is needed to ensure accounting accuracy. Also, internal monitoring and process validation are required to ensure your policies and procedures are being followed and are driving better decisions and reduced expenses.
Your lease management software can aid that process in several important ways:
- Documenting the terms of every lease, calculating every payment, and alerting you if payments don’t match the lease terms
- Providing audit tools to find overpayments, late fees, and payments that shouldn’t have been made at all
- Allowing you to customize approvals required for lease administration and lease accounting tasks
- Providing an audit trail for all lease changes
To get there, it’s critical to understand current market conditions, clearly define team responsibilities, and ensure consistent, accurate data capture across all lease-related activities. From tracking payments to recording journal entries, the right technology can transform lease management from a reactive process into a strategic advantage.