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.
This is yet another shocking account of an organization running lease management services without a software solution.
Our second cautionary tale in this eye-opening series reveals how a company missed out on $1 million during the acquisition of a new location.
Following a five-year plan for expansion, a regional retail franchisee secured a second location in a neighboring city. Because the company only had one site in their portfolio they had grown confident and accustomed to utilizing spreadsheets for their lease management and accounting needs.
After procuring their new location the company wanted to invest in more expansion opportunities. To make their process more efficient hey started researching lease management solutions. After a few in-depth consultations, the franchisee learned something much more valuable than originally anticipated: They discovered $1,000,000 went missing during their acquisition!
This cautionary tale is about a smart, yet Excel-dependent victim unknowingly overpaying $157,920 on a property lease. Not because of a corrupt landlord or getting tricked into a scam. The significant overpayment was simply due to a lack of data insight and access to information.
Unfortunately, shocking accounts of overpayments on leases occur more often than imagined. In the case referenced above, the lessee used spreadsheets for lease administration and lease accounting, believing these tools to be sufficient.
Despite Excel being a useful application with countless benefits, the popular software does have limitations which can often lead to costly errors.
Until recently, this specific technology typically played a minor supporting role, making only brief appearances in the operations of larger organizations.
Over the past few years, however, lease administration software solutions have garnered increased attention. They are no longer overlooked as a low priority item or considered a resource that only major players could afford.
Commercial lease administration software is now viewed as a necessary tool for a critical function in the business practices of most companies.
Do the new lease accounting standards apply to your company? In almost every case, the short answer to that question will be yes. The long answer involves taking a closer look at your contracts.
But, first, exactly which new leasing standards are we talking about? There are three standard-setting accounting boards: the International Accounting Standards Board (IASB), the Governmental Accounting Standards Board (GASB), and the Financial Accounting Standards Board (FASB). Each develops guidance on financial reporting for specific types of entities.
Which standard you need to comply with depends on what type of organization you are. Entities with leasing activities that fall under more than one board’s jurisdiction, will need to report according to the guidelines set forth by each board concerned.
If you’re in the beginning or middle stages of ASC 842 implementation, you may be wondering how to proceed right now. The coronavirus pandemic has hurled economic uncertainty with shared concerns for our health and well-being through astounding obstacles of global shutdowns.
Private companies were already facing a myriad of challenges to reach compliance in time. As of April 8, however, this financial turmoil has spurred FASB to extend the deadline until 2022. However, considering our currently unprecedented complications, the additional layer of a mandated implementation processes has proved paralyzing.
Witnessing that many lessees and lessors may need to modify leases as a result of the international crisis, FASB voted unanimously to delay the effective dates for its standards on lease accounting and revenue recognition for certain entities, due to the difficulties presented by COVID-19. However, the deadline for compliance will still be fast approaching and continuing with your implementation strategy is essential.