Managing leases can be a complicated and time-consuming process. If you’re spending hours dealing with leasing paperwork, lease administration or lease accounting software can save you time and increase accuracy and visibility. In short, the right leasing software can be a game changer for accounting and finance teams.
But what exactly is lease administration software, and how does it work? Here’s everything you need to know about lease administration solutions.
Lease administration software serves several important functions. Crucially, it acts as a centralised database holding all the important information about leases. This includes leasing information such as lease agreements, insurance information, payment information, and lease expiration and renewal dates. The software allows you to easily manage lease payments from within one easy-to-use system.
Lease administration systems also feature financial analysis tools to help you gain visibility and insights from your data. Moreover, this software also often has features for streamlining workflows, creating custom notifications and alerts so you never miss an expiration on the equipment, property, or any other sort of asset being leased.
Also sometimes called lease accounting software or lease management software, lease administration software is a great way to save time and increase accuracy and compliance when managing your portfolio of leases. With a lease accounting solution, companies with large numbers of leases can manage their lease portfolio more easily and effectively.
Lease accounting software is designed for the accounting and finance teams of lessee organisations. This type of software is useful in a range of industries which involve assets being leased from their owners. Here are just a few examples:
One common use for lease management software is in real estate. The combination of a complicated and highly regulated leasing process with large numbers of properties, landlords, and tenants means that software for lease management is invaluable for real estate leasing. A lease administration tool simplifies and ensures compliance across the process.
A lease accounting solution may also be used in the construction industry to provide clarity and visibility over all construction equipment that is being leased.
Fleet rentals are another example of equipment leasing which can be simplified using lease accounting tools. No matter how many vehicle leases you’re managing, the right software can provide a simple and accurate overview that gives you greater control over the portfolio.
Lease accounting software simplifies compliance with GASB, FASB, IASB, as well as the newer IFRS 16 and ASC 842 accounting standards.
Since coming into effect in most countries in January 2019, International Financial Reporting Standard 16 (IFRS 16) has changed the way that lessees report on leases in financial statements. IFRS replaced the IAS 17 accounting standard and now requires organisations to report their lease payments on balance sheets as lease liabilities. In effect, this means that operating leases will now almost always be considered finance leases and, therefore, must be capitalised and counted on balance sheets.
ASC 842 is similar to IFRS 16 and applies to any company that needs to present financial statements in compliance with the FASB’s GAAP. This is likely to be companies that are domiciled in the United States.
Under these new accounting standards, lessees only avoid reporting lease liabilities on balance sheets when the lease term is less than 12 months or if the assets are low value. Other aspects of IFRS include that profit and loss accounts should include depreciation of right-of-use assets and interest, while primary lease payments should be reported separately from additional costs towards maintenance and more.
How does this link back to lease accounting software? It goes without saying that the new complexities introduced by IFRS 16 make it worthwhile to use powerful lease accounting software that has been designed for IFRS compliance.
Lease accounting solutions offer a wide range of benefits for your company, such as ensuring that important deadlines are always met, regulations are followed, and data is all visible and securely held. However, not all lease administration solutions will meet every requirement. If your company is thinking of buying a lease administration system, here are the key things you need to look out for:
Perhaps the most important consideration when shopping for lease accounting software, compliance with the most recent accounting standards, such as IFRS 16 is essential.
Automated lease calculations can save you a lot of time each month when compared to calculating leases using spreadsheets.
A good lease administration system will be able to track all leasing events throughout the lease lifecycle. This includes mid-term adjustments, terminations, and additions.
Reporting is another important aspect of your lease management software. Look for a system that offers accurate and flexible reporting for all of your leases, including the low-value and short-term contracts.
When choosing your lease accounting software, you’ll want to make sure that the new system can integrate with your existing accounting or ERP software or has the capabilities to replace them.
Look out for modular accounting solutions that allow you to bring together a range of accounting activities in a seamless system.
If you are looking for lease administration software to centralise all lease data, simplify compliance with IFRS 16, and track and automate lease accounting processes with ease, FMIS Lease Accounting offers a comprehensive solution for lessees.
Our lease management solution is a powerful and feature-rich system that gives you visibility and control over all leasing. Available as cloud-based software or on-premises, the lease management software can even be integrated with your existing ERP or accounting software.
To see FMIS Lease Accounting in action, book a demo today.
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