When it comes to lease accounting, companies must ensure accuracy and compliance when recording and reporting financial statements. While accountants play a huge role in this, tools like Excel make recording, calculating and reporting easier and more accurate. However, newer tools have become available that make the process even more efficient. Lease accounting software not only ensures accuracy, it facilitates reporting while aligning with FASB ASC 842 compliance standards. So, what really changes for your business after implementing lease accounting software?
As mentioned, before lease accounting software, companies relied solely on accountants and Excel to ensure that real estate leases were accurately recorded and reported. This meant manually inputting or migrating all lease information from other documents into Excel files to later be calculated and analyzed to create reports. This included everything from the signing of the contract to all transactions performed until the expiration of the contract. With a company’s portfolio likely including multiple leases, the process required a lot of time and attention to detail to ensure accuracy and reports free of errors.
With much of the work in Excel having to be performed manually by accounting and finance teams, guaranteeing data integrity and accuracy is hard. Not only is human error an undeniable risk, but with multiple members working on the same document and inputting data relevant to the lease, duplicate data may also be a possibility. Data integrity and version control across all users is far from guaranteed.
Another limitation to consider when working with Excel is the complexity of the new lease accounting guidelines. ASC 842 demands an increase in transparency in reporting by requiring all companies to record their leases on the balance sheet. This also involves complex calculations and requirements regarding lease reporting. For instance, the new standards require a differentiation be made between lease and non-lease components and how and when they should be recorded in the report. Unfortunately, Excel doesn’t come with a function or formula that enables this to be done, requiring the accounting team to complete the calculations manually and often based on interpretation.
Another thing to keep in mind with Excel is that it doesn’t provide the lease accounting data stored in the document with enough security that companies require when dealing with such information. Especially when having to share the document with multiple members of the company, having a password-protected solution is not enough. Furthermore, given the time involved in creating such a document and the need to quickly share it upon completion, final review and revision are often skipped. Additionally, there is a lot of maintenance required to keep track of all due dates such as costs, renewals and contract provisions, all of which can lead to inaccurate and incomplete reporting.
Lease accounting software, like the one provided by Yardi Corom, not only addresses all the limitations mentioned above, it also enables users to perform tasks associated with lease accounting from a single, end-to-end integrated solution. All members involved in creating and reporting on real estate leases can easily port documents within the system allowing for top security when dealing with such sensitive information. Furthermore, they can record and track all modifications and activity and even send and retrieve information from core accounting platforms, to ensure accuracy and efficiency.
Members can also automatically generate reminders for financial and accounting team members to enable them to stay on top of due dates and payments. Report generation can also be automated, and just as easily shared with stakeholders. This all eliminates errors and data risks associated with performing such tasks outside the system. Lease accounting software provides customizable and comprehensive reporting functions and ensures ASC 842 and IFRS 16 compliance for all reports. Not only does this solution save time, but it provides companies with the accuracy and assurance that reporting is done efficiently and according to lease accounting standards.
With multiple lease accounting software solutions available, finding the right one can be challenging. However, deciding on the most critical features to automatically guarantee accuracy and compliance is key. Yardi Corom provides a cloud-based solution that addresses all the above Excel 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.
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