With the rising costs of purchasing resources and assets, many firms are looking into leasing solutions to maintain their operations without making large upfront investments. Businesses routinely lease key resources such as property, cars, services, office equipment, machinery, and digital initiatives to save money. This allows businesses to function effectively while paying a lower amount on a monthly, quarterly, or annual basis.
However, managing many complex leases can become a challenging task for businesses, particularly when it comes to managing the financial or accounting aspects associated with all types of leases.
Furthermore, manually handling large amounts of paperwork or intricate spreadsheets can increase the risk of inaccuracies and result in non-compliance with the ever-evolving lease accounting standards. This is why it has become imperative for businesses to implement smart lease accounting software. In this article, we’ll delve into what lease accounting software is and how it benefits businesses dealing with different leases.
What is Lease Accounting Software?
Lease accounting software is a dedicated system encompassing all the tools required to streamline the lease accounting process. This includes:
- Automating accounting procedures
- Managing lease portfolios
- Managing lease terms and contracts
- Calculating and tracking lease amortizations
- Managing lease payment reminders
- Handling lease renewals and terminations
- Generating financial reports
- Posting transactions in ledgers
- Integrating lease accounting with other information systems
- Compliance with lease accounting standards like GASB 87, GASB 96, ASC 842, and IFRS 16
If you’re considering the best software that meets all your business needs, consider EZLease for lease accounting compliance and automation. Compared to other lease accounting software, EZLease operates in a cloud-based environment that allows you to manage your leases on the go anywhere, at any time, and with any device. This state-of-the-art software has powerful features to allow businesses to manage all aspects of their leased assets – from lease acquisition to amortization, budgeting, financial reporting, and lease analysis.
EZLease can support global currency dealing and sub-ledger accounting, which sets it apart from conventional lease accounting software. It supports multiple report generation that can be customized to cater to your business’s unique requirements, all while ensuring strict compliance with the latest lease accounting standards. This specialized accounting solution assists businesses in expediting lease accounting operations and allows you to link financial data with any existing workflow automation systems.
Benefits of Lease Accounting Software for Your Business
Lease accounting software is incredibly valuable for businesses dealing with complex lease terms and managing a larger lease portfolio. Here are some of the most significant advantages of using lease accounting software for businesses:
1. Automate Workflows
This is perhaps one of the most obvious benefits of lease accounting software. Workflow automation allows businesses to stay on top of their lease amortization, contract management, lease renewals, and task allocations. A lease accounting system automates and simplifies the tedious, mundane processes related to lease portfolio management without significant human intervention, improving overall efficiency and saving time and money. The system can automatically calculate payment amounts, generate amortization schedules, generate and send invoices and receipts, and create reports related to lease progress.
Using notifications and reminders in lease management software, businesses can keep themselves safe from missing out on critical dates related to lease renewals, lease payments, and even lease terminations.
2. Streamline the Complex Leasing Processes
Managing your leases manually can be an intricate and rather challenging task. Maintaining lease terms, tracking amortizations, and managing schedules are overwhelming and consume a lot of your employees’ valuable time.
Lease accounting software can eliminate the tedious task of managing leases manually and help you streamline the entire lease accounting process, making it more manageable and less time-consuming.
3. Compliance with Accounting Standards
One of the major problems many lessors face is strict compliance with the new lease accounting standards. The outdated solutions or manual dealing of financial transactions make it difficult to track leases and report them in financial reports.
This is where lease accounting software comes in handy. These dedicated software solutions ensure that each action taken during the lease lifecycle complies with the lease accounting standards and that the leases are visible and disclosed in essential financial reports.
4. Greater Insights
Lease accounting software provides actionable insights into your entire lease portfolio. This means acquiring lease data and using it to run comparative and predictive analyses to determine the return on investment and compare the total costs of acquiring a lease versus purchasing new assets.
Businesses can also use this data to analyze the long-term benefits of a leased asset, evaluate lease terms, and make informed decisions regarding lease management.
5. Meet Lease Renewal Deadlines on Time
Meeting critical deadlines is an essential practice in lease management. If you fail to track amortizations amid many leases, you risk overpaying leases, missing important renewal or payment deadlines, or even facing a penalty.
To meet any critical deadlines, your business must be able to track down each lease and any extensions associated with it. Lease accounting software makes this process a breeze, as you can easily track your lease renewal and payment deadlines.
The software sends push notifications and reminders if a deadline approaches, allowing your business to stay on top of its payments and critical timelines and conserve its resources without incurring financial losses.
6. Increased Collaboration and Communication
For any business, it is imperative to ensure effective communication among concerned departments, management, investors, and stakeholders during the entire lease lifecycle. Lease accounting software ensures seamless data communication among all these entities and promotes better inter-departmental collaboration by providing a unified platform for all lease-related data.
Since the entire data is consolidated in a centralized database, internal and external stakeholders can access up-to-date data instantly to make decisions regarding lease agreements, terms revisions, lease renewals, etc. This helps businesses avoid the major pitfalls associated with miscommunications and optimize their lease portfolio for maximum output and better results.
7. Easier Audits
Financial audits can be a major setback if the information on balance sheets and other financial reports is inconsistent with your transaction record. Moreover, it becomes more of a headache for businesses to provide comprehensive reports and documents to external auditors to fulfill their requirements.
A lease accounting software makes auditing easier and smoother by providing all the information in a single click. Due to automation and strict compliance with standards, the chances of data inconsistency are virtually non-existent. In addition, since information systems increase a business’s data transparency, the information is readily available for auditors as per their requirements.
Lease accounting software provides many advantages for businesses that deal with any type of lease. It empowers businesses to manage their lease portfolio more efficiently and effectively and helps them improve their cash flows, reduce costs, and increase collaboration with internal and external stakeholders. However, before choosing a lease accounting software for your business, be sure to analyze your automation requirements and evaluate its benefits in the long term.