How Can You Tell if Projected Cost Savings by Leasing were Realized?

2 min read
April 16, 2019
CoStar Real Estate Manager Blog

How Can You Tell if Projected Cost Savings by Leasing were Realized?

So, the lease versus buy analysis resulted in a decision to lease because of good economic decisions. But how can accounting teams tell if the projected cost savings by leasing were actually realized?

Traditionally, leasing has been a decentralized process. It is nearly impossible to efficiently track tens of thousands of equipment assets effectively by using a traditional spreadsheet. Moreover, it is tedious to meet thousands of end-of-term notification deadlines without an automated workflow. There is the financial risk associated with managing your leasing program inefficiently. With the new lease accounting requirements centralizing lease data will be crucial to success both in meeting new lease accounting compliance standards and an improved balance sheet.

The idea of adding virtually all leases to the balance sheet is daunting, but the benefits reach far beyond accounting standards compliance. Gaining efficiencies in operations and providing insight into spending patterns around leases can result in significant savings. Factors in reaching success include understanding and developing accounting policy, careful project planning, staff training and importantly, a strategic software selection for lease accounting.

Look for opportunities to improve standardization, centralization, and automation. In addition to sweeping changes, look for opportunities to strengthen efficient micro processes needed for day-to-day business, such as lease versus buy models, standardizing contracts, sourcing leases competitively, and managing end-of-term agreements. Don’t be caught in evergreen fees because the lease lapsed unintentionally. Configure notifications to automatically send alerts to stakeholders at critical decision-making points such as returning, renewing or buying out the equipment.

By capturing all lease information in one centralized database, the benefits can reach far beyond accounting standards compliance. Businesses can gain efficiencies in operations by synchronizing critical data on spending patterns around lease portfolios. Leasing has the potential to become more efficient than ever before resulting in significant bottom line benefits. Ultimately, the key to success includes understanding and developing accounting policy, careful project planning, and implementing reliable lease accounting software. Initially, the business decision to invest in a lease accounting software system is to generate the information needed for financial disclosures under the new standards. The initial push toward compliance with new lease accounting standards is important, but ultimately it is companies must ensure that the software and policies put in place will continue to be valuable for acquiring and accounting for business assets well into the future. A company should develop a sustainable environment to monitor, control and continuously optimize leasing practices. With CoStar as your partner, companies can meet the new accounting requirements and drive positive business results.