This final cautionary tale provides yet another example of how automated leasing software can greatly reduce the occurrence of making unnecessary payments on your lease.
The story unfolds like this.
The owner of a car wash franchise acquired three additional locations in August of 2018. The lease year for all three locations was the same, from January to December. The terms of the lease called for an escalation of payments at the onset of each lease year.
Buried deep in the contract was also a clause that more specifically outlined the timing of the escalated payments: If the lease started on any date other than January 1, then the first lease year payment amount would remain the same from the commencement date--in this case August 2018-- through the end of the next calendar year.
Since the franchisee depended on a popular spreadsheet program that hadn’t been programmed with that information, he dutifully began paying the escalated amount one year after the lease commencement date. He didn’t realize it was too soon to increase payments, and therefore he overpaid on each of the three leases for five months.
Fortunately, the business owner began searching for a real estate management software solution at the beginning of 2020. After consulting with several different vendors, he quickly realized that using spreadsheets for his lease administration and lease accounting needs had cost him a significant amount in over-payments.
He also learned that not all leasing software providers are the same.
During the vetting process, he met with more than a handful of providers and came up with a short list of targeted questions to determine which vendors were best suited to help him streamline his lease administration efforts.
By comparing the providers’ answers and paying heed to how their customers rated them, he finally selected a vendor with a solution that worked for him.
Here are seven important questions you should be asking lease solution vendors:1. Does the software support all types of leases?
A company rarely has only one lease. In addition to a lease for property, most will have leases for vehicles, equipment, furniture, and embedded leases in service contracts for office equipment. Effective management of more than 10 leases, regardless of their type, requires automated processes to stay abreast of critical dates and other terms and conditions of material importance.
2. Does the solution integrate with FASB-compliant lease accounting software?
When you’re talking about lease administration solutions, it’s beneficial to expand the conversation to include lease accounting. It’s a given that you want your lease administration software to integrate seamlessly with your current accounting and ERP systems.
However, it’s wise to look ahead and make sure that you’ll be able to add a lease accounting component in the future.
Keep in mind that although the Financial Accounting Standards Board has delayed compliance with its new lease accounting guidance due to COVID-19 concerns, at some point you’re going to need to account for your leases according to FASB 842 requirements.
Even if you believe your company’s size doesn’t warrant a lease accounting application right now, it makes sense to choose a provider that also offers a compatible solution for when the need does arise.3. What kinds of advanced reporting features does the solution offer?
Look for leasing software that provides a vast selection of standard reports that can be configured according to your needs. You’ll also want a solution that allows you to create ad hoc reports. Advanced reporting features will enable you to easily track and analyze lease data for improved forecasting and decision making.4. How do you maintain the integrity and safety of lease data?
Since your lease data will impact your balance sheet--and even more so under the new lease accounting standards--it’s critical that the vendor you choose can provide SSAE 16 audits and three-factor authentication to ensure access is gained only by authorized users.
5. Do you have an in-house team to help with implementation and technical support?
It may surprise you to learn that some leasing software providers outsource their implementation services and technical support. Not only does this mean you’re likely to end up with multiple points of contact, but also with varying levels of leasing expertise. The best lease management software providers will have their own teams to help guide you through implementation and beyond.6. What is your customer retention rate?
Look for a software provider who can show you a list of satisfied clients, especially ones who are of similar size to your company and in the same industry. In addition, investigate further to see how long their clients have remained with them. Contracts with a software provider last one or two years, so the fact that a vendor retains customers year after year says a good deal about the quality of their support and service.7. How much of your company revenue is generated from lease administration and accounting solutions?
This question may seem odd, but there’s a good reason to include it in your research.
Many companies have only recently ventured into the lease administration and lease accounting software industry. Their core business may be in site selection software or something related to leasing. But with the issuance of the new lease accounting standards, they may have seen an opportunity to expand and are still new to the space.
Ideally, the vendor you choose for your lease management should be one who has focused on that area for years.
Conclusion: Prioritize functionality in your leasing software.
You may have noticed that the question of cost was missing from the above list. You’ll find all kinds of price points as you search for the right leasing software provider. Instead of prioritizing solutions based on cost alone, invest in a solution that provides the functionality you need to streamline your lease administration processes today, and offers scalability to grow with you tomorrow.
Take the time to find a user-friendly solution that offers the following benefits:
- Support for all types of leases.
- Integration with your lease accounting systems.
- FASB (or GASB) readiness.
- Advanced reporting features.
- Safeguards for the safety and integrity of your lease data.
- In-house technical expertise.
- A high level of customer satisfaction.
- Focused experience in lease administration and lease accounting software.
At AMTdirect, we can say with absolute confidence that our software solutions meet all the above criteria.
Our team has been helping clients eliminate time-consuming manual tasks and reduce their cost of occupancy for over 20 years.
We’d be delighted to speak with you and answer any questions you may have about a lease administration software solutions.