ASC 842 and IFRS 16 lease accounting standards are changing to ensure business practices and reporting maintain an appropriate level of transparency and trust. Before year-end, private companies must transition from the previous standards and be in full compliance with new IFRS and FASB standards. While this transition may be fueling questions and anxiety, companies should also embrace the real benefits which can be realized along the compliance process.
In order to comply with the new standards, companies are required to pull copious amounts of data on leases. While cumbersome at the onset, the end result is greater, more intuitive insights into your leases. Implementation of lease accounting software with a custom reporting feature will allow you to provide your business leaders with specific advice to consider as they enter and renew leases.
Improved Data Management
Centralization of lease contracts and related documents in one software system will make it easier for any department to find what they are looking for. Plus, manual data entry of critical lease and contract information such as renewal and payment dates leaves a lot of room for error. While not intentional, these mistakes can be costly when the result is missed payments or late fees. By implementing new lease accounting software to aid with compliance, the new solution should also track important dates associated with every lease. A good software solution will send automated notifications of status changes for critical data elements, including renewals, to the accounting department in advance of critical dates. This results in time and money saved.
Better Vendor Management
Another advantage associated with centralized lease accounting is better vendor management and harnessing the full potential of the organization’s buying power (or leasing power). A holistic view of all leases in one repository may reveal economies of scale and provide opportunities for increased leverage with certain vendors.
More Efficient Audits
Any change that makes the auditing process easier is exactly what an accounting department wants to hear. Let’s face it, responding to auditors’ requests is time-consuming and stressful. But with the new lease accounting software, auditors can remotely log in, pull reports and access data without having to bother, or visit, the accounting department. This makes everyone’s job easier!