It’s pretty basic economics…
When there’s high demand for a product or service in the market, the price goes up. And the amount of providers able to offer that high-demand product or service goes down.
This is especially true when the product or service isn’t offered by many vendors in the first place. And it’s exactly what’s happening with lease accounting vendors right now.
The truth is, there’s a shortage of companies that offer financial lease accounting software.
When you consider the fact that most public companies are ramping up for year two of reporting, and private companies have only a little over a year to meet their compliance deadline, it should come as no shock that there aren’t enough solutions in the market today to support the growing needs of U.S. companies.
Even in the best of circumstances, there would be a squeeze.
And with complexities galore and stringent audits, implementing the FASB ASC 842 deadline by January 1, 2021 certainly does not present the brightest of futures.
Because this shortage is so significant and not many experts in the industry are talking about it, we’re covering it in depth. Use this information to light a fire under your own compliance efforts.
The Math of Financial Lease Accounting Providers
Business is booming.
At least this is true for the top 50 lease markets, which have seen business volumes increase by 16.6% year-over-year.
The bad news is, most companies that hold real estate, equipment, vehicles, or embedded leases are pushing off the implementation of the new lease accounting standards: Only 6% say they’re fully prepared.
And while lease accounting software is making impressive gains in the market, the truth is that there’s just not enough capacity in the industry to handle the demand.
The gap is hard to miss when you take the time to study the options. It’s slim pickings for lease accounting software providers. In fact, there are only about 20 in the United States to choose from.
The top 10 most well-known software providers for lease accounting compliance are:
- IBM Tririga
- Tango Analytics
- Visual Lease
So what’s the big deal if you can only count the number of lease accounting software providers on one hand?
It becomes apparent when you consider the overwhelming amount of private companies in the United States vying for a software solution.
The cold, hard numbers spell it out: There are 5.9 million companies in the United States. Of those, 2.2 million have more than five employees. You can assume only five percent of those 2.2 million meet the compliance criteria for FASB ASC 842.
That leaves 110,000 companies looking for lease accounting software.
And that means each of the 20 viable providers would have to assist 5,500 companies each - in just a year - to cover the entire market in time for the compliance deadline.
The word impossible comes to mind.
That equation doesn’t even count the myriads of public companies that either:
- Completed implementation manually last year and are looking to automate their processes in 2020 with lease accounting software.
- Want to switch lease accounting software providers.
- Want to upgrade features and functionality with their current lease accounting software.
These public companies were first in line with the new accounting standards deadline, thus taking front seat when it comes to the attention of lease accounting software providers.
The math spells out a simple mandate for private companies.
Start implementing the new accounting standards now and choose your lease accounting software as soon as possible. Otherwise, you’re probably going to miss the boat on selecting the best lease accounting software for your business.
You’ll be stuck with the leftovers… if there are any.
The Benefits of Lease Accounting Software
With such an alarming deficit in lease accounting software, private companies may be tempted to reconsider using it at all.
This is a huge blunder.
When you consider that 67% of public companies said the actual implementation of the new lease accounting standards was somewhat difficult or difficult, the winner of the software vs. spreadsheet debate becomes crystal clear.
The accuracy and completeness that lease accounting software provides is unparallelled:
- Lease classification
- General ledger integration
- Formula validation
- Role-based access
- Audit trails
- “What if” modeling
- Journal entry account consistency
- Disaster recovery and security
- Standard and custom reports
- Consistent compliance with accounting standards
You’ll get 100 percent compliance with the new accounting standards - no errors, no mistakes, no costly slip-ups.
Besides up-front benefits, lease accounting software provides a wealth of advantages when it comes to business insights to power future decisions. The new lease accounting rules will force you to re-evaluate your buy vs. lease decisions and optimize terms for leases you do commit to.
Perhaps one of the clearest advantages of lease accounting software is the inclusion and detailed organization of all lease types - real estate, equipment, vehicles, and embedded - across all locations. This is especially important for filing disclosure reports under the new accounting standards, as auditors will be honed in on seeing a complete population of leases.
And when your leases are appropriately documented and in a central location, you’ll often discover cash you left on the table or data that gives you more negotiating leverage.
Conclusion: It’s Now or Never
Sometimes the outcomes are worth the risks.
But that’s not the case when it comes to waiting to choose a lease accounting software for FASB ASC 842 compliance.
Despite the delayed deadline for private companies, the clock is ticking for implementation. What seems to be plenty of time will dwindle away quickly as you try to wrap your arms around your complete population of leases (and all 55 data points that need to be captured), get all internal stakeholders on the same page, and verify reporting is accurate.
And when the new accounting rules apply to just about everyone - whether you have just 1 lease or 10,000 leases - you really have no choice but to turn to automation in order to meet the compliance timeline.
If you want to get the new accounting standards done right and on time, lease accounting software is the answer.
That’s where we come in. Our team has over 20 years of experience in lease accounting and is well-versed in helping companies implement the new lease accounting standards. Save your spot at the table before the big rush! Get a head start now.