From our whitepaper Data Consolidation for Lease Accounting Compliance: An Opportunity to Create Value for Real Estate and Equipment Management
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There’s nothing like compliance with new regulations to bring about organizational change. But change presents opportunity. Making wise decisions for compliance with the new FASB and IASB lease accounting standards offers the opportunity to add value to companies by streamlining processes, empowering better decision-making and realizing cost savings.
The first – and most important – decision should involve creating a plan to consolidate real estate, equipment and other leased asset data into a centralized technology system. The accounting group is the best choice for a department to lead such an initiative due to the technical nature of lease reporting requirements. And while other departments may retain responsibility for engaging new leases, the ideal technology solution will manage input from multiple sources and provide administrative insight to key organizational stakeholders.
There are five key areas where a consolidated lease data system can create value for a company’s real estate and equipment management.
1. Better Quality, More Reliable Organizational Lease Data
Having all lease data managed in a single system has some obvious benefits including ease of access and the ability to have a global view of an organization’s obligations. But the transition to one management system also encourages uniform processes for data entry and record-keeping, which leads to overall quality improvement and data reliability. For successful lease accounting compliance, reliability is the ultimate goal.
2. More Accurate Accounting and Reporting
Data reliability fosters complete and accurate accounting, improved auditability and time savings in the preparation of financial reports, 10K footnotes, budgets and forecasts. Time-savings can also be realized with the right software selection, as routine reports can be automated and run at the touch of a button.
3. Better Visibility and Control of Assets
Leases tracked in silos across a company are often managed with varying levels of scrutiny. Not only will the transition to a centralized data management system give companies a more accurate picture of leased obligations, it will provide individual departments with better control over procured assets. Many groups may still use spreadsheets to track leased assets that don’t provide the management benefits of a software system including automated renewal reminders and data change notices. An ideal platform also enables departments to manage payment obligations, set approval workflows and control lease abstracting quality across an entire portfolio of leases.
4. Eliminate Wasted Spending on Outdated or Unnecessary Items
With visibility into all organizational lease portfolios, spending patterns can be seen along with opportunities to eliminate unnecessary spending or over payments on lease obligations. Particularly with equipment management, the two most common areas for wasted spending relate to lack of unbundling and poor end-of-term decision-making. The outcome of these data management weaknesses is that companies overpay for leases. Significant cost savings can result from properly organizing data, enabling company-wide analysis. This also can provide better leverage for negotiations with vendors.
5. Lower Total Cost of Ownership for Lease Management
Perhaps the most compelling reason to consolidate data is the potential for lowering the overall cost of managing leases. A centralized system will likely reduce the overall spend for lease administration across any organization. When shopping for lease accounting software, keep in mind that not all systems offer the same pricing structure. Many large enterprise options have large overhead costs to cover, while other models are priced solely on the number of system users. A better pricing model focuses only on the amount of data managed, based either on the number of leases or amount of data managed, which provides an unlimited amount of system users for all departments and stakeholders in the organization.
Our whitepaper – Data Consolidation for Lease Accounting Compliance – highlights the benefits of a unified lease data management system, the best approach to organizational data consolidation and the problems to avoid in the process.
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