Modern businesses today look for ways to simplify and automate the complex process of lease accounting and compliance. For them, lease accounting software has become an invaluable tool.
With the adoption of new standards like ASC 842 and IFRS 16, having robust software in place allows for streamlined processes and smarter decisions around leases.
The right lease accounting solution can also help companies like your own minimize compliance risks and gain insights into lease obligations.
With that said, here are some ways you can maximize the potential of lease accounting tools for your organization.
Ways You can Maximize the Potential of Lease Accounting Software
1. Select the Right Software
First things first, with a growing number of lease accounting software options now available, you must assess your specific organizational needs before selecting software. Make sure the software seamlessly integrates with your existing financial systems and workflows.
Consider necessary features like automated data extraction and bulk uploading of leases, customized reporting, built-in accounting logic as per the latest standards, and scalability to handle your evolving lease portfolio.
Also, opt for a cloud-based software solution because it can offer more flexibility and mobility than other options. For large enterprises, enterprise-grade solutions may be more appropriate than basic tools.
2. Understanding Different Lease Accounting Standards
Before adopting any lease accounting software, it is important to understand the specific regulations and standards that apply to your business.
The main standards are ASC 842, IFRS 16, and GASB 87. ASC 842 is the new lease accounting standard in the US under US GAAP, while IFRS 16 is the parallel standard under IFRS.
For governmental and public sector entities, GASB 87 establishes the guidelines for lease accounting and financial reporting. Considering the unique needs of these entities, selecting a specialized GASB 87 software can be particularly beneficial in ensuring targeted compliance and reporting accuracy.
Reviewing the nuances of the standards that govern your entity will help you choose software that effectively handles compliance under the relevant regulations.
3. Maximizing Software Features
Modern lease accounting platforms come equipped with an array of built-in tools to optimize various aspects of the leasing process. Make sure you are fully utilizing the features that can deliver the most value.
For instance, using auto-population and auto-calculations can help reduce manual errors and streamline compliance. Dashboards give you real-time visibility into lease data and metrics. There’s another feature that can also perform ringless voicemail drops to make your marketing dreams come true.
Additionally, advanced analytics, forecasting tools, and customized reporting provide actionable insights to enhance lease management. Automated notifications and alerts around key dates help you stay on top of deadlines and avoid non-compliance. Identify how to best use the capabilities aligned with your priorities.
4. Integration with Other Financial Systems
To avoid inefficiencies from fragmented systems, your lease accounting software should integrate seamlessly with your broader financial tech stack, including your ERP system, T&E software, real estate management tools, etc.
This enables a smooth flow of lease data across platforms and a consolidated view of your financial position.
Consider software that comes pre-configured with connectors and APIs to sync with complementary systems.
Data integration capabilities like automated data extraction and bulk uploading also facilitate quick adoption across the organization.
5. Customizing Reports for Better Insights
Utilizing the reporting capabilities of your lease software is important for unlocking valuable insights from your lease data. Leading solutions come equipped with pre-configured reports covering common disclosure statements, calculations, reconciliation, and more.
Additionally, look for customizable reporting features that enable you to build specialized reports tailored to your business needs. You can track KPIs like ROU asset values, lease expenses by department, maturity analysis, etc. Check that reports are available at all levels, from high-level executive overviews to granular property or asset-level views.
6. Staying Updated with Software Upgrades
Accounting standards and compliance requirements will continue to evolve, so it is critical to keep your lease accounting software updated. Opt for cloud-based software that simplifies this process through automatic updates rather than manual upgrading.
When significant changes occur, like the recent ASC 842 and IFRS 16, ensure that the software provider has made the necessary enhancements to maintain compliance. However, testing and validation protocols should be followed before adopting major version releases.
7. Training and Skill Development for Teams
To truly optimize lease software, you must train the users across your organization effectively on utilizing the solution. Conduct training workshops when onboarding teams to the new system. Cover essentials like data input, report building, integrations, workflow management, and more.
Continuous education enables them to maximize features and enhance adoption. Maintain training guides and documentation for reference. As the software is updated, schedule refresher sessions to share new capabilities.
8. Data Security and Backup
Lease data, contracts, compliance documents, and reports contain sensitive information that your contract drafting software should safeguard. Ensure adequate data security provisions like role-based access controls, encryption, password policies, etc., are provided.
Capabilities like data loss prevention, disaster recovery mechanisms, and backup features are also vital. Conduct periodic audits to identify any potential vulnerabilities or gaps in security controls. Maintaining backups provides an additional layer of protection and allows you to restore your data in case of unexpected system failures.
9. Monitoring Lease Performance Metrics
Good lease accounting tools provide the ability to closely track and monitor key lease performance metrics over time. This includes the ability to view real-time values and trends related to metrics like ROU asset values, variable lease payments, modified leases, impairment amounts, etc.
Dashboards and reporting allow you to analyze movements and drill down into specifics. Set thresholds and alerts around KPIs like lease versus buy analysis, EBITDA impact, lease expense by department, and more. The visibility enables data-driven decision-making to optimize lease costs and risk.
10. Seeking Community and Support
Make use of available online resources, user communities, and support channels to improve your lease software utilization. Participating in community forums enables you to connect with other users, share best practices, and learn expert tips. Technical support teams can help troubleshoot challenges and answer questions.
There are also knowledge portals that offer useful self-help resources like step-by-step guides, blogs, video tutorials, and webinars that make onboarding and adoption smoother. Use these channels proactively for a better user experience.
11. Staying Compliant with Evolving Standards
Lease accounting standards are constantly evolving, so it is essential that your software is always up-to-date on the latest changes and requirements. This avoids compliance gaps or failures.
When regulators issue new pronouncements or guidance, verify that your software provider will make the necessary product enhancements and updates to maintain compliance. Aside from the accounting software, your internal lease accounting processes and controls also need to reflect new mandates.
