Why Lessor Accounting Software Is a Game-Changer for Modern Lease Management?

Why Lessor Accounting Software Is a Game-Changer for Modern Lease Management?

Lessors have been subject to increased scrutiny since the collapse of Enron and WorldCom at the turn of this century. Additionally, changes to lease accounting rules by US GAAP and IFRS have tightened regulations.
Lessors need help managing current accounting regulations and changes that may happen. Advanced lessor accounting software is helping lessors manage accounting regulations. These solutions help lessors streamline operations, providing real-time insights and asset management.

Understanding Lessor Accounting Software

What is the difference between lessor accounting solutions and generic accounting solutions? Lessor accounting software provides tools to manage the lifecycle of leases and assets. Generic accounting solutions focus on a single event or transaction. They help lessors with compliance, real-time insights, track assets, customer service, and collections.

The Growing Complexity of Lease Management

Leasing portfolios are becoming complex. New lease products and higher levels of compliance reporting contribute to the complexity.

Regulatory Compliance

The burden of compliance with accounting standards, IFRS 16 and ASC 842, requires accuracy, details, and disclosure. These rules may be modified by the authorities or updated based on interpretation. Automation is key to staying compliant.

Financial Reporting

Lessors need to constantly make decisions on the performance, risks, and optimize their portfolios. The lease accounting system provides consistent and stable information for financial reporting.

Data Management

Leasing portfolios are becoming larger and complex, resulting in large volumes of data. Managing and easily accessing data for responding to clients, internal analysis is required. This helps lessors react to changes in the business and environment.

Risk Management

Risk needs to be managed carefully to monitor business viability. Risk can be classified as credit risk, market risk, and operational risk.

Managing potential defaults or asset obsolescence needs to be done proactively. Manual systems or data in silos are not conducive to proactive monitoring.

Key Benefits of Lessor Accounting Software

Simple
Lease accounting solutions should be simple. Simplicity enables intuitive workflows with rules for accounting compliance.

Scale
Lessors should be able to grow their portfolio. Increased lease portfolio volume, value, and geographic spread, leveraging the same solution.

Reporting
Lessor accounting solutions should enable real-time decision-making with comprehensive reporting. Nowadays, lessors are looking for dashboards to monitor their KPIs.

Streamlining
Good lease accounting solutions enable lessors to streamline their operations. The first step to streamlining is minimizing the number of applications accessed to perform a single activity. In addition, data can be collated from multiple sources for analysis.

Proactive
Real-time dashboards and proactive alerts help lessors to manage issues as soon as they arise. Periodic analysis often results in escalations, which could be expensive.

Savings and Optimization
All process efficiencies result in savings. Reconciling errors requires resources, time, and effort to identify and may impact profitability.

What to Look For in Lessor Accounting Software

Comprehensive Lease Administration
Lessors need to track leases from inception to close. Assets from procurement to disposal, automation of critical terms, tracking documents, and notes.

Automated Financial Accounting
Accounting needs to be fully integrated and automated. Users perform activities on contracts, assets, or cash while the system does the rest. The system automatically creates accounting that seamlessly updates your general ledger.

Compliance Capabilities
Lessor accounting solutions should maintain comprehensive and transparent audit trails. These systems with audit trails and transparency easily support regulatory reviews.

Robust Reporting and Analytics
Real-time reporting, dashboards, and analytics are critical for managing any leasing business profitably. Key insights are needed to proactively manage assets and customers through the lifecycle.

Integration with Other Systems
Lessor accounting systems must be open, making it easy to integrate with origination or CRM systems on the front end. Some lessors require integrations with an ERP system for managing inventory or services to assets on or off lease. Ultimately, accounting data should easily be uploaded to the general ledger.

Ease of Use
Lease lifecycle management solutions must be easy to use. Easier to do things right than wrong. Identifying and correcting errors is suboptimal and expensive.

Choosing the Right Solution

Lessors need to understand their current requirements and proposed plans. The solution must be able to scale not only for volumes but also support the products and processes planned. Ease of implementation and use makes the difference between success and failure.

A solution that takes a long time to implement runs a risk. The processes and requirements may change dramatically before it is put to use. The vendor should constantly upgrade their technology to the best and latest available.

Conclusion

Using the most appropriate lessor accounting solution can make a difference. Is the software helping you manage your business, or are you managing the software?

Advanced solutions help you streamline operations, increase efficiency, scale, and manage risk. Insights help you become a proactive lessor, building long-term relationships with your customers.