Lease accounting solutions help corporate occupiers and accounting teams accurately and efficiently report on finances and operating leases. And when new standards are released, like FASB ASC 842, meant to be implemented across all organizations by December 15th, 2021, lease accounting solutions help occupiers easily transition to the new guidelines. As such, efficient lease accounting software is essential in ensuring that the compliance failure rate is as low as possible and that companies don’t have to invest unnecessary time and resources on accounting processes and reporting. Unfortunately, there are some issues that might prevent lease accounting solutions from functioning as intended. Below are five lease accounting software shortcomings and how to overcome them.
Missing Audit Details
When it comes to lease accounting, details are important to ensure that reports are accurate. Most solutions only provide a standard disclosure report containing all of the numbers and data required by ASC 842, leaving out necessary lease-level information. This requires that auditors manually ensure that the totals listed in the report are accurate. To do this, they must retrieve lease documents and amortization schedules to compare with what is provided in the report. An effective lease accounting solution allows for lease amortization schedules and documents to be stored in the software, making it easy for all relevant details to be published in the disclosure reports.
Lack of Ad Hoc Reporting
Efficient lease accounting software provides companies with the ability to easily create custom reports as needed. When accountants are not able to run streamlined reports focused on specific information, such as amortization schedules for current or terminated leases in a specific region, they must resort to manually retrieving the necessary data. For instance, an Excel spreadsheet provides a standard report, but would require manual effort to remove all irrelevant information before obtaining the specific data they are looking for. Lease accounting software, like the one provided by Yardi Corom, enables accountants to create ad hoc reports in the software, focusing on the specific information they want, and in any format they want. Accountants can even allow others to see the report and request automatic updates.
Leases are prone to change throughout their lifetime, making automatic remeasurements an essential feature of lease accounting solutions. Without this functionality, accounting teams must manually calculate renewals, terminations or impairments. Because remeasurements are conducted regularly, creating a new calculation for every new measurement requires a lot of time and repetition. With a high-performing lease accounting solution, accountants automatically receive reports and data reflecting the remeasurements, ensuring accuracy and efficiency.
No Company-Specific Fields
Tracking lease information is a top requirement for lease accounting solutions, but company-specific data is also important to ensure complete and accurate reporting. If the lease accounting software has no way to track company-, business- or industry-specific information along with the lease data, users must record those details separately, increasing the likelihood of inaccuracy or out-of-date information. While it is important that lease accounting software efficiently produce a balance sheet, it’s also important that it acts as a single source for all relevant information, whether related to the lease, the company or the industry.
No Policy Compliance Check
Another software shortcoming is the inability to test and determine errors in lease data entries. Accuracy is essential for the volume of information associated with lease data and amortization schedules being stored. If errors are entered in the software, either manually or through bulk uploads, issues for lease payment processing can arise. Furthermore, additional time will be required to identify and correct inaccuracies. Powerful lease accounting software determines errors based on specific standards, such as ASC 842, and provides accountants with clear instructions for what to fix, while also tracking changes for future reference. Speaking of bulk data uploads, sophisticated software blocks any records that contain errors and marks the fields that need to be modified, allowing users to save time and ensure accuracy in uploading reports.
Finding the right lease accounting software for your company can be a challenging task. However, keeping these limitations in mind can help you determine the most critical features in the software you choose. Solutions requiring manual work and longer processing times will cause inaccuracies and further challenges down the line. Yardi Corom provides a cloud-based solution that addresses all the above limitations, ensures compliance with FASB standards and streamlines lease accounting and reporting.
Yardi Corom is a simple and comprehensive accounting, lease and workplace management solution for CRE tenants. Our cloud-based software solution increases efficiency and accuracy across your entire lease portfolio: manage leases and subleases, track key lease data, centralize transactions and become FASB/GASB/IFRS compliant. To learn more, you can visit our website or schedule a meeting with our team.