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.
The elevated focus on lease management systems is the result of a chain of events that initiated with the corporate scandals of the early 2000s. The gross misrepresentations and unethical practices of a few publicly-traded giants led to much needed oversight and stricter regulations regarding financial reporting.
The Securities Exchange Commission, the U.S. Congress and the three private accounting governing boards issued sweeping corrective measures to prevent that era of economic history from repeating itself.
One of those changes was a major shift in the way operating leases--whether for real estate, vehicles, equipment or a controlled asset which is part of an existing service agreement--are accounted for.
Due to the new lease accounting rules, both public and private companies faced the prospect of increased scrutiny, the daunting task of adjusting their accounting policies and procedures, and executing their newly defined practices according to a planned timeline.
While searching for processes to alleviate the stress of implementation and reduce the manual labor required to adopt the new standards, many companies discovered the value of integrating automated, cloud-based lease accounting solutions.
At the same time, savvy companies also realized the benefits of using lease administration software.
Because the new guidance requires companies to move virtually all their operating leases to the balance sheet, implementation of the new lease accounting standards can materially impact the bottom line.
As businesses analyze contract details and compare the outcomes of different leasing arrangements, they begin to realize the importance of improving the functions--such as managing leases for property and other assets--that previously were simply considered a cost of doing business.
With overhead and operating costs (which among other expenses includes rent, vehicle and equipment leasing) ranking as one of a company’s top five budget concerns, there exists a significant opportunity for savings resulting from consolidating lease information. Deeper insights into leasing activities often translate into optimized use of assets and more favorable lease terms.
The downside of not staying on top of your leases
Many organizations complete a multitude of lease-related transactions each month--rent, insurance, tenant improvement allowances, common area charges, and sublease payments are just a few--that must be accurately processed. The information in your database needs to be correct and up to date to minimize the risk of several negative consequences.
- Unintentional lease renewal
If you have more than a handful of leases, it’s easy to let important dates slip by without taking the necessary action to prevent a lease from automatically renewing. In some parts of the globe, leases with terms lengthier than five years are commonplace, so an unintended renewal could result in costly future obligations.
- Undesirable payment penalty
Again, keeping track of all the critical dates and details within your portfolio of leases requires agility and attentive coordination. Paying a penalty due to a late or inaccurate payment should not be an expected “cost” of doing business.
- Unpredictable compliance challenges
Public companies that have already adopted the new lease accounting rules have voiced a common caveat regarding compliance: The implementation process will require more time and resources than you expect. Inaccurate or incomplete data will magnify the complexity of compliance and increase the chance of errors in your financial statements--which could mean additional penalties.
Lease administration software saves more than the day
Comprehensive lease administration software mitigates the risks of unintentional lease renewals, payment penalties, and compliance issues while lowering occupancy costs and increasing cross-functional collaboration within your company.
Finding ways to improve lease management practices while increasing lease-associated savings is always a chief priority, but those tactics are especially strategic now. At a time when most private companies are preparing for compliance, centralized, accurate and accessible lease data is absolutely necessary.
If your business is working toward adopting the new standards, this is an opportune time to integrate an automated lease management system. Lease administration software optimizes processes to ensure streamlined, efficient lease management which supports accurate reporting and better informed decision-making.
Although lease administration software products vary with respect to features and functionality, any solution you consider should provide the following benefits.
- Centralized accessibility
A cloud-based solution with a mobile application affords the most flexibility. With all your lease data, including non-financial clauses and supporting documents, stored in one central repository, anyone who needs access to the information can easily find it no matter where he or she is located.
- Critical notifications
Lease expirations, option renewals, changes to lease terms--all this critical information is automatically tracked to send advance alerts and notifications via email to prevent a potentially costly mistake. The solution should also send reminders if the needed action has not been completed.
- Integration with accounting
For maximized efficiency across departments, any software you consider should have the capability to integrate with your accounting system. Integration simplifies lease payments and provides insight into the financial impact of leases, aiding in the decision on which leases to renew or terminate.
- Customized data
Your portfolio of leases is unique to your business as is the data that you find useful. The
lease management system you select should allow you to create an unlimited number of custom fields using your preferred terminology.
- Advanced reporting
Making data-driven decisions is facilitated by valuable reporting tools which allow you to choose from a comprehensive menu of standard reports which can easily be customized.
Many lease management systems offer mapping tools that combine demographic details, market statistics, financial information and other data in a visual way that enhances comprehension.
Conclusion: Lease administration software improves lease accounting
Because of the changes to financial reporting requirements, companies are now focusing not only on how to accurately account for their leases, but how to better manage those contracts.
Comprehensive lease administration software streamlines the lease management process, provides visibility for better decision-making and reduces the costs associated with occupancy. There are many lease management systems on the market, but for maximized performance, choose one that provides the following:
- Anytime, anywhere accessibility
- Automatic alerts and notifications
- Seamless integration with accounting systems
- Customizable data fields
- Standard and customized reporting capabilities
- Mapping tools
In addition, look for a provider that offers knowledgeable support. At AMTdirect, our team has worked with clients for more than 20 years to implement user-friendly solutions for improved lease management. We’d be delighted to have a chat with you to answer any questions you have about how lease administration software can help your business grow.