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Five Reasons Lease Accounting Solutions Fail

Five Reasons Lease Accounting Solutions Fail

Lease accounting is a nascent market that has only existed since 2016. However, within the past couple of years, CoStar Real Estate Manager has already replaced numerous lease accounting systems because they didn’t meet customers’ expectations or requirements. There are five main reasons why lease accounting solutions fail.

When prospects view any lease accounting software demonstration, it appears that it will handle most of their lease accounting duties. But it’s not until customers actually use the software do they realize it lacks numerous automated lease accounting features, reporting and integration capabilities, and security. Below are the five major reasons customers are dissatisfied with their lease accounting software.

  1. Lease Accounting Functionality

The first area where systems don’t meet expectations is in lease accounting functionality. A lot of functional depth is needed for lease accounting. Customers need advanced remeasurement capabilities or retrospective adjustment capabilities, and many more capabilities, but customers don’t realize they need all these capabilities until they actually use the software. During a demo, most prospects focus on the accounting schedule. Customers need to understand the depth of their lease accounting requirements and work with a provider that can discuss their needs and the capabilities the software must have to satisfy them.  

If customers don’t choose a solution that has the right functional depth to meet their needs, here’s what they end up with: a lot of workarounds. Those are very costly and bring about all kinds of audit challenges. While an application may look as if it can serve a company well, if it lacks functional depth, companies end up with a lot of manual processes that are very expensive for an organization.

  1. Data Model and System Structure

If a company has multiple business units, is multi-national, or has grown through acquisitions, the underlying data model and security model has to support a complex portfolio. CoStar has replaced systems where the customer couldn’t provide reports that contained only the data they wanted and couldn’t allow individual access to limited portfolios. Reporting characteristics aren’t typically seen in a demo, so companies need to understand how users will access their leasing software systems and to test required reporting capabilities before selecting a lease accounting system.

  • Integrations

Not all solutions are integrable. Customers need to look for a solution that not only can support enterprise integrations but also has those integrations managed throughout the life of the contract. Digital transformation is underway. All company departments are getting connected, and integrating a lease accounting solution into other enterprise infrastructure is critical.

  • Software Platform Security

Sometimes an accounting group or business group makes an application decision without talking to corporate IT. When IT teams vet the underlying platform, they realize it doesn’t have the security, the redundancy, the service level requirements or the reliability that’s required by the company’s internal IT standards and corporate security group. Some companies that purchased lease accounting systems waited too long before evaluating those things. They later found out they had a platform that didn’t meet their IT security requirements and had to select another lease accounting system.

  • Software Vendor Execution

As a company that has been around more than 20 years, CoStar has seen other companies created to meet the new lease accounting standards. These companies were founded in the 2015 or 2016 timeframe. They’re private companies and some of them are thinly capitalized. Companies need to look for suppliers that have strong capitalization and cash positions. Companies should ensure that the supplier can integrate with the company’s enterprise infrastructure for a long-term successful journey for their lease accounting and digital transformation strategy.  

Dave Gibson

Vice President, Sales and Marketing