4 ways lease administration software reduces risks

Published on: February 16, 2021

As your lease portfolio grows, the need to reduce risks becomes key. The more leases you manage, the easier it is to miss critical dates and fail to spot mistakes in payments or lease terms. Over time, these mistakes can accumulate and cause harm to your company’s bottom line.

If you’re serious about scaling your lease portfolio or have multiple entities already, you should be aware of lease management’s administrative demands. Many companies try to meet this demand by outsourcing lease administration, but this is not a long-term solution and can be more costly over time. If you’re curious about the differences, check out our previous blog, which compares outsourcing complex lease admin and lease administration software.

In this blog, we focus exclusively on how lease administration software reduces your risks. We will touch on obvious risks like compliance and the need for full visibility and error-free data to make viable business decisions.

1. Reducing the admin burden and gives full visibility of financial health

One of the significant risks of managing multiple entities (often resulting in hundreds of leases) is that the administrative burden of pulling financial information can mean your team spends weeks trying to get visibility of your company’s financial health. At the pace business decisions are made today, real-time access to your leases is essential if your operations are to grow or even just remain viable.

Managing leases requires full visibility of your contracts—including terms, due dates, renewals, obligations and costs—at a moment’s notice. The more leases you have, the harder this can be to achieve, and so processes and systems that once allowed for full visibility can become quickly obsolete as your operations grow.

The more leases you acquire, the more complex lease administration can become. Many companies struggle to realize the administrative burden that the wrong software can create. Pulling reports, double-checking lease terms, or even just lease renewals can become a nightmare if not managed properly.

It’s essential to find a lease management solution that combines lease administration and accounting to have full visibility and quickly and effectively check payments, and analyze costs. You need full visibility of financial health to give you the information you need to make informed business decisions.

2. Easier to implement lease changes in uncertain times

 Easier to implement lease changes in uncertain times

One thing we can be sure of in life, as well as business, is that change is inevitable. Any good business strategy accounts for the possibility of change, and lease administration should be no different. Approaching your leases with an agile mindset will be vital to surviving uncertain times.

The COVID-19 pandemic is one example of how an unpredictable event can have unforeseen implications for leases. Companies with property lease management software were able to implement changes across their systems. In contrast, companies without effective software struggled to handle the burden of changes to leases during this time. Some of those changes included modifications to lease terms, lease terminations, lease impairments, and variable payments due to rent deferrals.

Trying to locate and update every lease manually is a time-consuming process. With wide-ranging changes at this scale, it will undoubtedly have resulted in numerous errors and mistakes that will have to be corrected when creating financial statements.

Recommended reading  

  1. How to implement GASB 87 during uncertain times 
  2. Impact of COVID-19 on lease concessions under IFRS 16 

3. Automation reduces mistakes and highlights critical issues in your system

Data errors and obsolete processes can lead to errors that may inadvertently lead to poor business decisions. If you’re acting on manually entered data, it may be time to consider how accurate the information you’re using might be.

When it comes to lease administration software, it’s easy to manage the bulk of processes through automation, saving your team time, so they’ve time to double-check leases and reports before you act on them. Often, teams are pushed to their limits just trying to consolidate information into a report. The right software facilitates best practices in data management so teams are freed up to focus on higher priorities.

Similarly, in the rush to get reports finished each month and payments processed, critical dates can be overlooked (a costly mistake!). Lease management software gives you the power to create alerts when important dates for your leases are due to recur.

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4. Reduces risk of non-compliance with accounting standards

Accounting standards are always changing. Regardless of which accounting standard your company needs to comply with (ASC 842, GASB 87, or IFRS 16), lease administration software reduces risks your company faces when it comes to proving compliance. No software can guarantee compliance, but they should be built to enable it, and with expert knowledge of the demands of the lease accounting on hand.

If you’re thinking of purchasing property lease administration software, it’s wise to jump on a call with the various companies and make sure they’re aware of the demands of these accounting standards on your leases. If they’re not, it’s unlikely their software will be suitable for companies who need to prove compliance across multiple entities.

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