Many companies are grappling with the transition to the new ASC 842 lease accounting standards. They are discovering their current systems to track and manage leases are merely not capable of handling the tremendous amount of additional recordkeeping and accounting work that will be required.
Smaller, privately-owned businesses that lease office space, some office equipment and a company car, may believe that maintaining the required lease information on spreadsheets still might be feasible. However, even such a small lease portfolio will need constant monitoring and manual updating — with many opportunities for error. In reality, even small businesses are at the point where they have determined that dedicated lease software is a necessity. Choose a long-term partner as your lease accounting software vendor with an excellent reputation for customer support, implementation, and ongoing data management and operations. Ensure their long-term viability by ensuring a larger financially stable parent company backs them.
In addition to provisions for ongoing maintenance, supplies, and service business machine service contracts may include embedded leases. Embedded leases are found in a broad array of locally contracted business services and devices ranging from computer servers and ATM machines to vending machines and beverage dispensers. Local managers may think of these agreements as service contracts, but they may contain leases.
As companies prepare for these rapidly-approaching compliance deadlines, financial officers recognize the need to centralize and integrate previously disconnected lease management practices, and they are using the new Lease Accounting Standard, ASC 842, as a reason to upgrade and automate outdated processes to new lease accounting software. The best lease accounting software should fit your business needs by optimizing business management and operations while still being cost effective to your company.
It will be necessary to compile an accurate inventory of all leases before companies can begin estimating the cost and effort involved in the transition to the new standard. While accumulating all the information necessary might seem like a relatively straightforward process, some companies are finding it more difficult than expected. For example, in some businesses, lease management is highly decentralized. Individual business units — and often particular locations — are accustomed to managing leases locally.
Most midsize and larger companies engage in hundreds or even thousands of individual leases. Accounting departments may find their existing systems do not record and report some of the detailed lease information required by the new accounting standards. The accounting department may be overwhelmed by the volume of hands-on work needed to consolidate the necessary information from various sources. In the long run, companies will need to implement consistent, repeatable processes that update the accounting organization whenever any lease changes occur, and many companies will require lease accounting software. When researching the right lease accounting software, be aware of any maintenance costs, upgrade fees or hidden charges. Cloud-based systems (SaaS solutions) offered by CoStar can be more cost-effective long term with features like unlimited user models, no software upgrade fees, and pay-per data pricing. The decision to upgrade lease accounting software should not only streamline your accounting processes, but it can also help your organization become more efficient.