How To Avoid Buyer’s Remorse With Your Lease Accounting Software
It’s a decision you shouldn’t take lightly. Depending on your asset portfolio and the solution you choose, you could end up paying hundreds of thousands of dollars each year.
The lease accounting software market has suddenly exploded as companies realize the potential to profit from helping other organizations comply with the new standards.
iOFFICE has a partnership with Visual Lease, a leading lease accounting software with more than 20 years of expertise in this area. Our asset tracking software can work in tandem with their solutions for comprehensive lease management. We spoke with Isaac Heller, VP of Strategic Alliances at Visual Lease, to learn more about what your organization needs to consider when evaluating lease accounting software.
5 Factors to Consider When Choosing Lease Accounting Software
1. What Is Your Asset Portfolio?
The lease accounting software that’s right for you will depend on what type of company you are and what assets you have. If you have a lot of property, for instance, you’ll need a software that is built to handle the added complexities associated with real estate lease accounting. For instance, real estate leases have more data points to track, and some values, such as Fair Market Value and Residual Value, require assistance from outside sources.
If you have a lot of equipment, you’ll need to bring all your equipment leases under one category to undergo the capitalization test. Without the right software, this can be a cumbersome and time-consuming endeavor.
2. How Advanced Does Your Solution Need to Be?
If you have a few dozen real estate assets that all have 30-year leases, that’s much easier to manage than 1,000 assets with leases that have varying terms. If you choose a solution that is far more advanced than what you need, you’ll regret spending so much. On the other hand, if you choose the least expensive, basic package when you have more complex reporting needs, you’ll have regrets of a different kind.
3. Is Your Company International?
If your company follows the International Accounting Standards Board, you will need to follow the new International Financial Reporting Standards, known as IFRS 16 Leases. These standards replace requirements that have been in place for more than 30 years and are also a major change to the way companies have traditionally accounted for leases. Although the IASB worked closely with FASB to develop its new standards, there are some differences between the two. The main difference, according to Accounting Today, is the fact that the U.S. FASB standard has a two-model approach for operating leases and financing leases, while IASB only uses a finance lease expense approach.
If your company is international, you’ll need a software solution that will ensure compliance with both standards and allow for dual reporting. You will also need to ensure it can handle multiple currencies.
4. Does The Lease Accounting Software Work With My General Ledger?
Whether your organization uses SAP, Oracle or another enterprise resource planning system as your general ledger, you’ll want to be sure the lease accounting software you choose will easily integrate with it.
5. Can It Handle Day-to-Day Lease Administration?
If you are properly tracking lease information on regular basis, it will be much easier to produce the accounting documents you need when the time comes. Make sure the software solution you choose can also handle lease administration and support any changes throughout the term of the lease.
A Final Word About Choosing Lease Accounting Software
A word of caution here: a number of companies that specialize in other areas have recently begun offering lease accounting as a way to make additional revenue. Others are expensive enterprise systems seeking to replace other software you already have in place, such as your integrated workplace management system (IWMS), when all you really need is lease accounting. If they claim to have expertise in everything, there’s a good chance they’re not doing anything well.
Since your accounting and finance departments will likely be the most frequent users of your lease accounting software, they should have the final say in the solution you choose. However, don’t let them pressure the rest of your organization into purchasing a large package intended to take the place of your IWMS and HR software when they aren’t going to be the end users of those systems. Find a lease accounting software that meets the above criteria, and let the lease accounting experts do what they do best.