In today’s fast-paced business environment, companies are increasingly turning to specialized software to manage various aspects of their operations. Lease accounting software, designed to streamline the complex process of lease management and financial reporting, has gained significant attention, particularly with the introduction of new lease accounting standards such as ASC 842, IFRS 16 and GASB 87. But is this software truly worth the investment? Let’s dive into a cost-benefit analysis to explore this question.

The Costs of Lease Accounting Software

Initial Purchase and Licensing Fees
Lease accounting software can be a significant upfront investment. Depending on the complexity of the software and the size of your organization, initial costs can range from a few thousand to several hundred thousand dollars. This includes software licenses, implementation costs and potential customization fees.

Training and Onboarding
Adopting new software often requires training your staff. This can involve time and money, especially if the software is complex or if you have a large team that needs to get up to speed.

Ongoing Maintenance and Support
Beyond the initial purchase, there are ongoing costs such as annual maintenance fees, software updates and customer support. Additionally, companies might need to invest in IT resources to manage and troubleshoot the software.

Data Migration
If you’re transitioning from a manual or legacy system, migrating data to the new software can be a time-consuming and costly process. This is particularly true for companies with a large volume of leases or complex lease portfolios.

Customization and Integration
Businesses often require custom features or need the software to integrate with their existing systems, such as ERP platforms. Customization and integration services can add to the total cost.

The Benefits of Lease Accounting Software

Compliance with Lease Accounting Standards
One of the most significant benefits of lease accounting software is its ability to help companies comply with the latest accounting standards. ASC 842, IFRS 16 and GASB 87 require companies to recognize lease assets and liabilities on their balance sheets, which can be complex to manage manually. The software automates this process, reducing the risk of errors and ensuring timely and accurate reporting.

Efficiency and Time Savings
Manual lease accounting is time-consuming and prone to human error. Lease accounting software automates many of the tedious tasks associated with lease management, such as tracking lease payments, calculating amortization and generating financial reports. This can save your accounting team countless hours, allowing them to focus on more strategic tasks.

Improved Accuracy
Automating lease accounting reduces the likelihood of mistakes that can arise from manual data entry and complex calculations. This improved accuracy can prevent costly errors in financial reporting, ensuring that your company remains compliant and avoids penalties.

Better Decision-Making
Lease accounting software often includes robust reporting and analytics features that provide insights into your lease portfolio. These insights can help companies make more informed decisions about their leases, such as identifying opportunities to renegotiate terms or optimize lease agreements.

Scalability
As your business grows, so does the complexity of your lease portfolio. Lease accounting software is designed to scale with your organization, making it easier to manage an increasing number of leases without a proportional increase in administrative burden.

Audit Readiness
Lease accounting software streamlines audit processes by maintaining a detailed and easily accessible record of lease data. This makes it easier to provide auditors with the necessary documentation, reducing the time and cost associated with audits.

Is It Worth the Investment?

The decision to invest in lease accounting software, like the one provided by Yardi Corom, ultimately depends on the size and complexity of your lease portfolio, as well as your company’s specific needs. For companies with a large number of leases, the benefits of increased efficiency, improved accuracy and compliance with accounting standards often outweigh the initial costs. Additionally, the time savings and reduced risk of errors can lead to long-term financial gains.

On the other hand, smaller companies with a limited number of leases may find that the costs of implementing such software do not justify the benefits. In such cases, manual management or a simpler solution may suffice.

In conclusion, while lease accounting software represents a significant investment, it can offer substantial returns in the form of compliance, efficiency and better decision-making. Businesses should conduct a thorough cost-benefit analysis tailored to their unique circumstances to determine if the investment is right for them.

Yardi Corom is a comprehensive and user-friendly 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.