Benefits Of Using A Lease Accounting Software
Lease accounting is the process of recording and reporting leases in a company’s financial statements. It is an important aspect of financial reporting, as leases can significantly affect a company’s financial position and performance. Besides compliance, lease accounting also plays a crucial role in decision-making and strategy formulation. By clearly and accurately understanding a company’s leases, the management can make informed decisions about future lease negotiations, lease renewals, and lease terminations. Companies need access to real-time lease data to stay competitive in today’s fast-paced business environment.
Certain accounting standards, such as ASC 842 (for US GAAP) and IFRS 16 (for IFRS), govern lease accounting. These standards provide more transparency and consistency in accounting for and reporting leases. Companies need to comply with these standards to ensure the accuracy of their financial statements and avoid potential penalties.
Using lease accounting software can help companies to automate their lease accounting processes, increase efficiency, and improve accuracy and compliance. And it also helps to have better visibility and reporting of the leases to make strategic decisions and better control over them.
What is lease accounting software?
Lease accounting software is a specialized software solution designed to help companies manage their leases in compliance with accounting standards such as ASC 842 (for US GAAP) and IFRS 16 (for IFRS). The ASC 842 is the new standard issued by the FASB that governs how companies and individuals record the financial impact of their agreements. With the ASC 842 explained, it becomes easier to understand the standards, and people can use these software solutions to automate and streamline recording and reporting leases in a company’s financial statements. The software typically includes features such as lease data management, accounting calculations, reporting, and compliance.
Here is how the software can assist in lease accounting.
1. Improved budgeting, forecasting, and financial decisions
Lease accounting software can help in budgeting, forecasting, and financial decisions by providing accurate and up-to-date information about an organization’s lease portfolio. It can include information such as lease terms, rental payments, and other financial data, creating more accurate financial forecasts and budgets.
Budgeting: Lease accounting software can provide detailed information about future lease payments and other obligations for more accurate budgets. By having access to real-time lease information, organizations can better plan for their future and identify potential areas of cost savings.
Forecasting: With the software, organizations can forecast future lease expenses, revenues, and other financial data. It allows organizations to make informed decisions about future investments, financing, and other financial matters.
Financial decision-making: With lease accounting software, organizations can easily analyze their lease portfolio and make informed decisions about managing leases to optimize their financial performance. By providing detailed financial information about leases, the software can help organizations identify renewals, terminations, and other lease-related opportunities that can affect the organization’s financial performance.
2. Improving Accuracy and Compliance
Lease accounting software can help improve accuracy and compliance by automating many of the complex calculations and journal entries required for lease accounting, reducing the risk of errors, and increasing the efficiency of the accounting process.
Automated lease accounting: The software can automate many calculations and journal entries required for lease accounting, reducing the risk of errors, and saving time for finance teams. It can include calculations related to the recognition and measurement of lease assets and liabilities, as well as lease amortization and interest expense.
Compliance with accounting standards: The software can help companies stay compliant with accounting standards, such as ASC 842 and IFRS 16, by providing the tools and reports to ensure compliance. It can include tracking and reporting lease-related information, such as lease terms, classification, and liability.
Improved transparency and visibility: The software provides detailed reports and analytics on the lease portfolio for identifying potential compliance issues, errors, or discrepancies that can be corrected and allows companies to have a better understanding of their lease portfolio, which can help them make informed decisions about their lease portfolio.
Streamlined lease administration: By centralizing all lease data in a single system, lease accounting software can help companies more easily manage and track their leases, ensuring they are in the accounting books.
Automated compliance reports: Most lease accounting software can generate reports required for compliance with accounting standards (ASC 842, IFRS 16) for financial statements, reporting to stakeholders, and internal and external audits.
By improving the accuracy and compliance of lease accounting, lease accounting software can help companies to manage their lease portfolio better and make more informed financial decisions.
3. Enhancing visibility and reporting
Lease accounting software can help enhance visibility and reporting by providing detailed reports and analytics on an organization’s lease portfolio. It can help companies make more informed decisions about their lease portfolio and improve compliance with accounting standards and regulatory requirements.
Improved visibility: Lease accounting software can provide real-time access to lease-related information, such as lease terms, rental payments, and other financial data. It can give companies a comprehensive view of their lease portfolio and make it easier to identify potential risks and opportunities.
Detailed reporting: The software can generate various reports that allow companies to gain insights into their lease portfolio and track the key performance indicators of their leases, such as lease payments, lease expirations, and rent escalations, among others.
4. Increased efficiency and productivity
With all lease information in one place, lease accounting software can help different teams access lease information and collaborate more effectively, resulting in increased efficiency.
Reduced manual work: By automating many of the manual processes and calculations required for lease accounting, lease accounting software can reduce the need for manual data entry, saving time and reducing the risk of errors.
5. Cost savings
With proper tracking and compliance with accounting standards and accurate financial reporting, lease accounting software can help to reduce the costs associated with external audits. By providing detailed information about an organization’s lease portfolio and helping to identify areas of cost savings, lease accounting software can help organizations to manage their leases better and reduce costs.
Lease accounting software can provide a wide range of benefits for organizations managing their lease portfolio, such as automation of accounting processes, improved compliance, and enhanced visibility and reporting. This software can also streamline lease administration, promote collaboration, and save costs. With real-time lease information, organizations can comprehensively view their lease portfolio, identify potential risk opportunities, and make informed decisions. The software is a brilliant solution for forecasting and budgeting. It can help organizations create a clear financial plan, monitor performance, and make informed decisions to achieve their goals. Using lease accounting software is a brilliant solution to help organizations manage their leases better, comply with accounting standards and regulatory requirements, and make more informed financial decisions.