In today’s fiercely competitive business landscape, where financial resources are often limited, leasing has become a popular option for companies of all sizes. Leasing enables businesses to excel without incurring the high upfront costs of outright purchases.
For businesses considering this route, it’s crucial to have a solid grasp of lease accounting principles. However, keeping up with the evolving demands of the modern marketplace can be challenging without the latest technological tools.
This is where a digital lease accounting solution comes in. It can help streamline and upgrade your system efficiency, resulting in several notable benefits for your business. In this article, we discuss six primary advantages of using lease accounting software for your company, which can pave the way for successful business growth and expansion.
Simple and Easy Compliance
In light of the recent implementation of new lease accounting standards, it has become imperative for both public and private entities to process all leases in accordance with each respective standard diligently.
However, due to varying parameters set for both lessors and lessees, manually tracking all lease details can be challenging, particularly during the transitional period.
Businesses can help work through these challenges by using lease accounting services, including ASC 842 software. This software provides an integrated classification system where information can be easily entered for both lessors and lessees to ensure compliance with the latest lease accounting standards.
The software’s automation features also let companies swiftly identify leases that no longer require adherence to regulatory standards, such as leases shorter than 12 months or leased items that have become obsolete through technological advancements.
Opting for a manual approach increases the risk of errors, potentially leading to delays and increased workload requirements, so this software helps make compliance with specific standards relatively easy.
Easier and Faster Audits
Are you struggling to manage and filter through lease-related data and documentation? Do different departments have their own records, making it difficult to locate information? Ultimately, sifting through a network drive can also be taxing and time-consuming.
However, with lease accounting software, you can access efficient search functionalities that streamline the process, providing quick access to the information you need. Furthermore, a cloud-based centralized database makes accessing all lease-related documents and contracts simple.
This type of software also includes a data repository with pre-built reports, allowing for simpler and faster audits. In fact, by granting auditors read-only access, they can quickly locate necessary information without disruptions.
More Well-Informed and Faster Decision-Making
Do you know your annual expenditure on leases? Are you capable of identifying lease expenses for each department or specific region? With vast data associated with leases, finding valuable insights manually can take significant effort and time. But, with the right digital tool, you can dive deeper into extensive data and extract critical information regarding expenses, profits, and losses.
Lease accounting software can also help you optimize your business strategy and enhance your cost management capabilities. Additionally, it enables you to create better budgets derived from software-backed information.
Understanding your financial status allows you to anticipate upcoming needs and make informed decisions about future operations. Eventually, this approach may help you negotiate leases when favorable opportunities arise, reduce risks, and improve the overall financial performance of your company.
Better Interdepartmental Collaboration
Are you still relying on Microsoft Excel to handle and manage your lease agreements’ data? Is your organization using a limited access decentralized system? If so, you are not keeping pace with modern times and should consider upgrading to the latest lease accounting software.
The reason is that multiple departments manage lease contracts within an organization. Employees can access a centralized system through lease accounting software to collaborate effectively, eliminating time wastage.
This also ensures that different teams can jointly create an easily accessible chart of accounts catering to standard processes and providing consistent information. In turn, businesses’ interdepartmental processes and communication.
For example, such a centralized system could send alerts to your finance team about upcoming deadlines while allowing the accounting team to track payments associated with the leases.
Seamless Vendor Relationship Management
As your business expands, it may encounter challenges in managing an ever-growing number of vendors. Due to this, utilizing lease accounting software can prove invaluable in effectively tracking and handling all business contracts and vendors.
Such a tool provides a comprehensive perspective on vendor interactions over time, offering insightful reports and analytics to enhance your business’ leasing and purchasing capabilities in the long run.
Moreover, by automating these processes, companies can save administrative time. Such a thing will help you focus more on building positive vendor relationships for overall success in the industry.
Efficient Meeting of Deadlines for Lease Renewals
One of the most important responsibilities in lease activities is keeping up with deadlines. Relying solely on a manual system to track contract and lease dates can result in missed deadlines, which may have serious repercussions for your business. After all, your accounting department may be overwhelmed with other important tasks, or an individual in charge of monitoring deadlines may overlook upcoming renewals or extensions.
Your company may then be vulnerable to missed payments, late fees, and other losses. Even if your business performs well, you cannot manage critical lease dates effectively without the right tools.
Fortunately, you can stay on top of your commitments by installing lease accounting software. By entering all critical dates into the system, you will receive automated alerts that will help you avoid missing important deadlines.
This state-of-the-art tool empowers your company to seize better lease opportunities while safeguarding resources and preventing financial loss.
In lease accounting, manual processes can prove to be a significant drain on a company’s time and resources, particularly when dealing with large or intricate lease portfolios. However, to overcome this challenge, lease accounting software can be valuable in reducing labor costs by automating lease accounting tasks such as amortization and classification.
By automating these processes, your business can streamline lease accounting activities and free up your finance team to focus on key strategic initiatives to drive profitability and growth.
The Final Word
In today’s rapidly-evolving financial landscape, cutting-edge tools such as lease accounting software have become essential. They allow business owners to obtain assets swiftly and keep precise records while easing the burden on accountants who adhere to strict accounting guidelines.
Implementing this software can reduce expenses, streamline processes, and avoid time-consuming tasks. Ultimately, this will enhance the accuracy of your financial reporting, presenting an objective and transparent view of your company’s finances.