Does your business still use Excel for lease accounting? If so, you’re not alone — many other businesses do the same.
But there’s a limit to what Excel can do for your organization’s lease portfolio. The reality is that leases are complex, dynamic documents that need a more comprehensive accounting option than Excel. Spreadsheets lack the ability to accurately and efficiently support large lease portfolios and the complex calculations required to comply with lease accounting standards.
To stay compliant with accounting standards (ASC 842, IFRS 16, GASB 87) and avoid costly mistakes or fines, your business must move to a solution that is built to accommodate the dynamic nature of leases.
Spreadsheets were never designed to handle processes as complicated as lease accounting. In fact, 100% of senior Real Estate executives believe it is impossible to sustain lease accounting compliance (e.g., ASC 842, IFRS 16, GASB 87) without proper lease administration practices in place.
Here are three major reasons that businesses are unable to rely on Excel for sustained lease accounting compliance:
1. Leases are constantly changing.
Leases evolve over time — including expirations, terminations and renewals — making it almost impossible to manually keep track of every change within a spreadsheet. Without sufficient controls to track these ongoing changes and, businesses are at risk of reporting on outdated lease data and missing important lease options. As organizations try to keep up with each changing lease, it won’t be long before accounting professionals leave Excel behind for good.
2. Excel can lead to non-compliance.
Lease accounting requires transparency in how businesses account for assets and liabilities. Auditors will check to ensure every lease is reliable and that your calculations are accurate. Just one mistake could lead to a failed audit, increased fees and fines, risk of legal action and more. There’s too much at risk to use Excel.
3. The Office of Finance has evolved.
For many organizations, the Office of Finance is now responsible for more strategic business initiatives and must accomplish more with less while navigating a weakening economy. Excel exacerbates this issue by requiring long hours of tedious, manual work that’s prone to human error.
3 reasons to switch to software designed for lease accounting
Lease accounting requires consistent upkeep of your entire lease portfolio. Investing in lease accounting software like Visual Lease helps ensure a seamless process and support ongoing compliance. Here’s why:
1. Centralized lease data.
Fully integrated lease management and accounting technology helps businesses closely maintain their lease data by organizing it in one location. As a result, teams can easily view lease clauses and options under a single source of truth without needing to manually sift through data. This, in turn, ensures accurate, reliable lease financials required for compliance.
2. Efficient lease management.
As financial teams handle more responsibilities with increasingly limited resources, lease accounting software makes tracking leases easier and more efficient. In fact, according to Visual Lease’s 2022 Lease Market Analysis, private companies saved an average of 600 hours by using third-party lease accounting software.
3. Reduced risk and confident compliance.
Lease accounting tools circumvent the human errors that often occur in Excel. In particular, Visual Lease automates otherwise complex reports and calculations and explains its calculations in every screen, leading to a more confident, reliable financial report. Additionally, when your business uses lease accounting software, auditors will have quick and easy access to your financial reporting and calculations.
Excel wasn’t designed to handle the in-depth, complex work required for lease accounting. And since leases are often a company’s second-largest expense, relying on Excel isn’t worth the risk of costly audits and fines. Instead, investing in a lease accounting software solution like Visual Lease ensures your business can stay compliant, avoid costly fees, identify cost-saving opportunities and leverage leases as a more strategic business asset.