Lease accounting requires precision and timeliness. A muddled, disorganized approach, particularly in light of the new standards in ASC 842, is a great way for your enterprise to get bogged down and stuck in the lease mud without a tow hitch in sight. In a marketplace that requires agility to find success, any such source of confusion or latencies only hinders your ability to compete in a crowded, compliance-heavy environment.
Assuming you actively try to prevent such messy scenarios from rearing their ugly head within your organization, Embark has some good news for you. Technology can provide you powerful tools to help avoid those lease accounting mud bogs and transform the generally consuming and complex operations into an added value for your company.
Given the number of potential solutions within the marketplace, however, choosing the most suitable lease accounting platform for your enterprise isn’t exactly like picking out a loaf of bread at the market, where anything reasonably close will likely suffice. Rather, picking the best vendor and solution for your needs requires a deliberate and organized approach, sorting through a lengthy list of criteria to narrow the field and help you find what’s best for your lease accounting procedure.
On that note, Embark offers you some of the factors to look for throughout your search, a sort of roadmap for your journey in finding the best lease accounting platform for your organization. Choose wisely, our friends, and your lease accounting can become a source of value for your enterprise, freeing team members and resources that you can devote towards growth and innovation rather than the consuming, complex processes only intensified by the new standards. Sure, our thoughts might be a touch on the exhaustive side but, given the importance of a sound lease accounting solution for your enterprise and it’s future, we figured better safe than sorry.
A power forward should be tall and strong. A baseball closer needs focus and nerves of steel. An action star needs to be good at, well, action. The cream of whatever crop catches your stare will always have a set of characteristics that define them, sets them apart from the also-rans and makes them distinctly superior in some way. That notion rings true for technology, lease accounting platforms included. Look for the following traits when choosing a platform for your lease accounting needs to arrive at a solution that adds the most value to your lease operations.
Lease accounting is notorious for its many moving parts. A good platform will lend an overarching efficiency to your lease operations, creating a unified point that collects all of your data and documentation into a single, convenient place. It should also be able to quickly sort through all of that information to find specific data points according to keywords or other search criteria. Such efficiency not only assists with your transition to the new standards but also makes modeling and forecasting more accurate and streamlined in the future, helping ensure you include all relevant data and that nothing slips through the cracks.
ASC 842 hasn’t completely redefined lease standards but has undoubtedly overhauled them, forcing companies to sit up straight and pay attention. As firms continue to acclimate themselves to the new standards, a lease accounting platform should help, not hinder their efforts by continually checking for compliance issues within operations. Think of your platform as an internal source of checks and balances, one that constantly weighs the best interests of your organization versus the lease accounting standards, generating reports and statements for transparency and insight along the way.
The bad guys are always looking for an upper hand. Any sound lease accounting platform will have ample data security measures built in, preventing sensitive information from slipping into the wrongs hands or evaporating into the ether from a faulty keystroke or another source of loss. The platform should automatically backup all data, log activity, and reveal only relevant data to any specific user. Those that only need access to a particular lease agreement shouldn’t have access to all of your agreements.
Sweat the Details
Aside from those broader characteristics, you should also look for additional functions that will add value to your lease accounting. Yes, every company is different with unique goals and demands but, for the most part, most, if not all, enterprises should consider the following factors and functions relative to their lease operations:
- Validation: The new lease standards bring heightened complexity to your lease accounting. Calculations and lease classification aren’t entirely straightforward so make certain your chosen platform has a good track record and is endorsed and validated by accounting experts.
- Lease Types: Sure, real estate leases might garner the most attention or notoriety, but they’re obviously not the only lease game in town. Be sure any platform you’re considering fully supports a number of contract types, of course including real estate but also more than capable of vehicle and equipment leases as well as any other type that applies to your operations.
- Lessor Functionality: Maybe you’re not the landlord type today, but that doesn't mean things can’t change tomorrow. If such a scenario occurs, choose a platform that can handle both sides of the leasing equation so you don’t have to reinvent the technology wheel down the road.
- Classification Testing: ASC 842 requires rigorous testing based on a lengthy list of factors to determine the proper lease classification. This is an area where the right platform can add significant value, streamlining the classification process for you and minimizing the most resource-consuming aspects of it.
- Lease Management and Compliance: As we said, leases have several moving parts. Things can and do come up over the term of a lease, including but not limited to renewal options, tenant allowances, and impairment. While these events often require a reassessment of FASB calculations, the right platform will automatically identify and react to such events.
- Audit Trail: Any auditor’s list of favorite things in life will undoubtedly include a wide, transparent, and easily navigatable audit trail. A centralized, robust lease accounting platform will be able to produce all the necessary reports to demonstrate compliance with the auditing gods. Likewise, that same reporting functionality will also serve you well with your board, stakeholders, and decision-makers.
- Support and Scalability: Choose a vendor and product with a well-regarded support team that can help you sort through the issues that arise, particularly in light of the new standards. Even with the best solutions, answers aren’t always obvious and can require a helping hand along the way. Similarly, make sure the platform is capable of growing with you as an organization to prevent another technology search just down the road.
Technology evolves at a rapid clip. Chances are, no matter when you’re in the market for a lease accounting platform, some new functionality or ability will be just down the pike. Don’t let such a notion prevent you from pulling the proverbial trigger, however, or you’ll forever be waiting for the constant march of innovation to pause and take a breather. Technology stops for no one, not even you and your search for a lease accounting solution.
Instead, look for other considerations like cloud storage, a good reputation, a financially stable vendor, cost efficiencies, and many more. Costs are naturally an important consideration so be sure you understand the platform pricing to prevent yourself from being nickeled and dimed from here to eternity. Yes, your lease accounting needs and deserves efficient and effective solutions but only when they make fiscal sense to your enterprise.
Do Your Homework
It's imperative that you conduct your own due diligence into the several platforms currently in the marketplace. Roll up your sleeves and start researching what platforms might serve your needs best. Aside from the factors we’ve discussed, take a close look at your own lease operations to see if there’s anything specific that might further narrow the field. As we’ve said before, choosing technology isn’t a matter of fitting your square peg of an enterprise into a round hole. Your lease accounting platform should mold itself around your needs, not the other way around.
Of course, Embark will be here throughout the process, providing you guidance, bad puns, and, most importantly, the benefit of our vast experience and expertise as you go. Remember, choosing the right lease accounting platform is only the first step in the process, albeit it a critical one. Proper implementation and integration are equally as important to get the most value from the platform. Be thorough and open-minded throughout your search, lean on Embark’s squadron of industry experts whenever needed, and transform your lease accounting from a resource drain to a source of value. We promise you won’t be sorry.