Many organizations are getting serious about selecting ASC 842 lease accounting software that can support the new FASB and IASB lease accounting mandates. If you are like most people, you probably don't choose a lease accounting software vendor every day, so we thought it would be helpful to offer some of the most important things to keep in mind when considering your options.1. Find a vendor that is actively implementing customers of your size and in your industry.
We suggest asking any vendor you consider whether they are actively implementing clients under the new standards today. Many vendors are claiming that they have a solution, but what they really mean is that they will have a solution by the deadline date. Ask each solution provider to tell you about their customers who are actively engaged in implementation and insist on a demonstration.
2. Choose technology that supports the current ASC 840 (FAS 13) standard for both real estate and equipment leases.
The FASB 842 and IFRS 16 standards are new, but companies have been required to report information about leases in the footnotes for quite some time, so FASB reporting shouldn’t be a brand new thing to your solution vendor.
3. Make sure the provider has a deep understanding of the data that is required to classify a lease, create the calculations, and report under the new standards.
These calculations are a lot more complex than most people assume. Much of the data that you’ll need from the lease isn’t commonly abstracted today, and there is information required that isn’t in the lease at all. The complexity of this effort is why we started working on our solution when the standards changes were first introduced more than ten years ago.
4. Insist on annual SSAE 16 audits and strict security requirements.
Security has always been an important lease accounting consideration, but the fact the more leasing information will end up on the balance sheet ups the ante even more. Not only does AMTdirect conduct SSAE 16 audits, we also offer three-factor authentication to ensure that your system is accessed by only those authorized to do so. In addition to asking about audits, ask about three-factor authentication.
5. Make sure the solution has been vetted by multiple accounting firms and financial reporting experts.
We recommend digging even deeper to find out if accounting firms and financial experts have verified the calculations and been involved in the development of the solution. We’re happy to tell you about the partners we are working with.
6. Choose a vendor with a service team to help with transition planning, implementation, abstraction, and technical support.
We think it is important that the service team be made up of in-house employees. Many vendors outsource this service work, leaving clients with multiple points of contact and unpredictable results. It is also important to look at the experience and mix of the service team. We recommend looking for teams that include CPAs, attorneys, and seasoned lease management professionals.
7. Make sure that you can get your data out of the system if needed.
You don’t want to be trapped in a system you don’t like. If you are thinking of transitioning from an existing lease administration solution to a new one that can handle the new leasing standards, now is a good time to start looking into how you will export data from your current system.
8. Find a system that integrates with your existing ERP and accounting systems.
You can see a partial list of the systems we integrate with right here. (Custom integration is also possible.)
9. Prioritize systems with advanced reporting capabilities.
Look for a system that allows for ad hoc reports and includes a selection of standard reports that you can configure for your own use. (We have more than 280 standard reports that you get at no additional charge.)
10. Ask about customer retention rates.
This is great advice when selecting any software system, but even more important when it comes to something as complex and important as lease accounting under the new standards. In the case of excellent service and support, the proof is in the pudding. For example, our average client has been with us for seven years. Our clients can leave us every year or so, but they don’t.
11. Use the new mandate as a chance to improve lease accounting processes.
We have some specific input from clients on how this mandate offers the opportunity to improve processes around leasing. For example, smart companies will be able to:
- Consolidate lease data into a single solution
- Get a handle on equipment and other leases that aren’t centrally managed today
- Modify contract approval processes to take into account the new standard
- Clean up and audit existing lease data
- Improve operating expense reconciliation procedures
- Identify and correct gaps in lease data maintenance
- Strengthen cross-functional collaboration
12. Make sure lease accounting is a priority for your vendor.
Some solutions are offered by companies that have many lines of business and competing priorities. We have taken a different approach. We are focused on doing one thing and doing it perfectly. Every dollar we spend and every person we bring on board is deployed to providing a world-class lease administration and accounting solution. We’re fully committed to having the best technology and team to help our customers meet their goals. That’s the only way we measure success.
We’re glad that people are starting to talk more about the details of the new lease accounting standards. It is a major change and will have a significant impact on how lease administration and accounting is valued within many organizations. Picking the right technology and services partner is the first step to a smooth implementation and accurate reporting over the long term. If you’re ready to get started, we’re ready to demonstrate our solution, share our endorsements, and tell you about the customers who have already gotten started.