In only a few months, the new lease accounting standards will come into effect. Companies are rushing to the many steps necessary to comply with the largest change to financial reporting in 40 years. One step that companies still need to take is to select quality software, and they are taking different approaches. Some companies are selecting one IWMS, one software to take care of all of lease accounting and lease administration (real estate and non-real estate) needs. Other companies are selecting a few vendors and taking the best-of-breed approach, the best software for each of those needs.
Integrated Workplace Management System (IWMS) describes a software that encompassed the following five modules: real estate and lease management, facilities and space management, maintenance management, environmental sustainability, and capital project management. IWMS solutions were first developed mainly for facility and real estate managers to track, manage, report, and plan real estate, workplace management, and facilities operations.
Best-of-breed approach is taking choice software for lease accounting and choice software for lease administration and using them together, syncing data through a common api.
Which approach should your company take? To clearly answer this question, influencers should ask themselves the following questions:
- What are your fundamental and comprehensive business needs?
Evaluate your current business processes and workflow related to lease management. How effective are those processes? A thorough investigation and comprehensive needs analysis will enable better software evaluation.
- What are your company’s top priorities?
Separate your “must-haves” from your “nice to haves.” A careful analysis will show you which approach will provide you a faster and more cost-effective solution to obtain the “must-haves.”
- How would your software choice affect your current business needs?
Business needs should drive technology decisions. By understanding your business needs, you are more likely to pick a software that will less disruptive to current organizational structures and workflows.
- What is the approach that makes the most sense for your required functionality and will provide a quick payback?
Which software meets both your requirements and has a short time to value? A software that has quicker payback and flexibility for expansion provides more visibility value than one that does not. Visible value leads to a quicker purchasing process.
- How well does the solution integrate with your existing applications today?
Much of the information that drives an IWMS is extracted from other systems. Make sure that the software that you pick can integrate with your existing applications today and doesn’t just promise this integration for the future. Technology quickly changes and product roadmaps and integrations are often delayed.
- How much are the implementation and customization costs?
Customizations are expensive. The IWMS approach usually requires more customization than the best-of-breeds approach. Ask about cost up front to stay within your project budget.
- Does the software have a history of delivering the promised solution?
Pick a solution that has been meeting customer expectations, and talk with at least two of their customers who have successfully finished implementation. It is not the “Promises Made,” but the “Promises Kept” that makes a successful selection. Ask if the software provider has implemented for both real estate and equipment leases, and under ASC 840.
- How much are the ongoing maintenance and application management costs?
Ongoing maintenance, application costs, and upgrade fees can be a significant part of total software costs. Total costs of ownership also include hardware and ancillary software. Being clear about these costs will allow you to stay within your project budget.
If you choose an IWMS approach, remember that having one software for your lease accounting and lease administration needs may result in less developed features for your team to work with. Also, be aware that the upfront costs for the initial customization may be a lot larger than that for a best-of-breeds approach and the implementation could be 12-24 months. Using an IWMS, though, gives you a single, shared repository of all leases for easier updates to leases and full visibility.
If you choose a best-of-breeds approach, you will be required to integrate your lease administration and lease accounting systems through a common api. Leases in both systems will need to be updated separately. Yet you will gain deep functionality and find existing customizations for both your lease accounting and lease administration needs. The best-of-breed approach will also give you a faster implementation schedule for a lower cost.
CoStar Real Estate Manager is the smart choice for lease accounting compliance for accounting and real estate professionals. Our solutions include lease accounting, strategy and analytics, portfolio management, lease management, lease administration, project management, transaction management, and lease abstracting and document management services. Contact us today for a demonstration.