Lease Accounting Software is All About Managing Lease Portfolios According to Accounting Standards
By Riddhiman Roy, Market Analyst at SelectHub
Lease accounting software allows you to manage mixed portfolio leases and update balance sheets. It can help generate public disclosure reports with a few clicks, streamline amortization and provide your team with a single source of information for seamless collaboration.
In this guide, we cover what lease accounting software is and how it enables businesses to adjust to the new accounting standards rolled out by FASB. We’ll look at its primary benefits, key features to consider, software comparison, pricing strategies, and much more. Let’s start.
Executive Summary
- Lease accounting software helps property managers and lessors automate and streamline equipment and real estate lease accounting.
- It helps maintain compliance, reduce costs, improve collaboration and enhance decision making.
- The key features include accounting, reporting, invoicing, lease library and equipment handling.
- Due to the variety of options available in the market, it’s vital to make a personalized requirements checklist and a budget before starting the selection process.
- It’s important to ask vendors the right questions before buying their products. We’ve listed a few important questions below to get you on your way.
What This Guide Covers:
Primary Benefits
Streamline Compliance
Human error poses a serious risk to a company's financial reporting. Lease accounting software can help maintain compliance with every domestic and international reporting standard while avoiding manual errors.
Reduce Costs
Critical details and obligations are often buried deep within a lease, and a lack of insight can cause unnecessary expenses. On top of that, the penalty for not adhering to accounting standards is steep.
Luckily, lease accounting software can mitigate these risks by improving visibility into lease obligations, avoiding audit costs and automating daily processes.
Improve Collaboration
Collaboration can be a headache for big companies with multiple departments. Using several decentralized systems can cause confusion and bottlenecks.
Lease accounting solutions act as a centralized library of all lease data and automate major recurring administrative tasks to free up associates for problem-solving and scaling.
Enhance Decision-Making
Leadership teams can use lease accounting software to quickly find and access any data they need to make informed decisions. The system automatically cleans data and ensures accuracy.
A few solutions offer analytics modules to identify trends, create forecasts and drill down on opportunities.
Features & Functionality
| Accounting |
You can maintain specific ledgers for each property and owner. The system segregates financial and operating leases based on current standards.
Set up amortization schedules for individual or portfolio-based accounting, specify rules for charging late penalties, and design triggered messages and reactions throughout the lease lifecycle.
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| Reporting |
Create reports following every domestic and international standard. You can use a customizable template library to design personalized reports and track business-specific metrics.
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| Invoicing |
Create and send invoices for rents, utility bills, maintenance charges and other ancillary transactions. You can also schedule invoices for recurring transactions.
Look for PCI-compliant solutions for a secure payment environment.
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| Lease Library |
The software should store every lease and make it easily accessible for team members.
Advanced solutions offer AI and optical character recognition (OCR) to read leases, identify key information and auto-populate fields.
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| Equipment Handling |
You can automate depreciation and maintenance cost calculations, track location and schedule check-ups for optimized equipment performance. Receive real-time notifications and define rules for automated renewals.
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Software Comparison Strategy
The global lease accounting software market is valued at $622 million in 2022 and is expected to reach $1767.7 million by 2028, according to a recent report. This rise is due to gradual societal digitization topped with FASB’s effort to make company balance sheets more transparent and minimize off-balance sheet activities.
When looking for lease accounting software, it’s important to find a solution that fits your business’s type, scale and operations. It’s easier said than done due to various options available in the market, each with unique features and selling points.
We advise you to make a personalized requirements checklist before starting the selection process. Here are a few pointers you should consider while devising your checklist:
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Integrations: Make a list of your existing software stack (including potential solutions you might use in the future) and look for lease accounting systems that offer seamless data connection. A few noteworthy integrations with lease accounting software include ERPs, accounting software, fleet management platforms and more.
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Type of Portfolio: There are two types of lease accounting software depending on the use case. Portfolio lease accounting solutions manage multiple assets with the same lease start and end dates like a fleet of ships, factory machinery and other equipment. Individual lease accounting solutions help manage diverse real estate portfolios, including apartment rentals, vacation rentals, commercial properties and more.
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Security: Lease accounting platforms are a hub of crucial business data. Choose systems offering SSL encryption for in-platform data transfers and multi-factor authentication for user logins. Ensure the platform is PCI compliant if it connects with a payment gateway; otherwise, don’t store credit card information.
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Team Members: Some solutions cap the number of team members you can onboard. Make sure the software of your choice can handle your entire team and offer a simple UI that your team is comfortable using.
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Deployment: Choose a deployment option based on your business’s level of technical expertise and IT infrastructure. SaaS is ideal for small and medium businesses looking to quickly deploy software without spending much on IT infrastructure and experts. In contrast, on-premise is better suited for enterprises looking for absolute control over the software architecture.
Once you have a personalized checklist, start sifting through options and discard those that don’t offer the required features. Additionally, you can try out product demos, consult local peers and go through online reviews to gain a holistic understanding of the product.
Cost & Pricing Considerations
Lease accounting software generally comes on a per lease, per month basis. Most vendors offer monthly subscription-based pricing, while others provide perpetual licenses to deploy the software wherever and however you want.
Enterprise solutions provide advanced features, including AI, OCR, BI and business analytics, and premium support options. We recommend preparing a budget and searching for software ticking all the boxes in your requirements checklist without crossing the budget.
Some vendors charge extra for onboarding team members, implementation and migration support, and advanced functionalities. Make sure you ask them plenty of questions for a transparent picture of their pricing and product.
Questions to Ask
It’s essential to ask both your team and vendors the right questions in your software selection journey. It helps recognize your unique requirements and identify the primary benefits of the product.
Use the following questions to start an internal conversation:
- What are the pain points in your business’s lease accounting workflow?
- What type of lease does your business handle?
- Which accounting standards does the new software need to comply with?
- How many team members will you onboard?
- Which external software will you integrate with the lease accounting platform?
- Which deployment option will suit your business needs?
- What’s your budget for the product and advanced features?
Use these questions to start conversations with the vendors:
- Can you scale and customize the solution?
- Does it offer mobile capabilities?
- What are the additional features and their cost?
- Does it follow every accounting standard your business uses?
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Can the software support your marketing and integration needs?
- What training and support options are available?
- Does the vendor offer migration and onboarding support?
- How does the vendor safeguard customer data?
In Conclusion
Lease accounting solutions are a must-have to keep up with complicated accounting standards and public reporting guidelines. It can help you maintain compliance, ensure accuracy and save variable costs. Carefully sift through the various options available and ask vendors plenty of questions. Choose software that not only simplifies daily operations but also adds value to your organization. Happy selecting!
