The sheer range of options open to those grappling with complex lease administration can be overwhelming, particularly when you consider the introduction of accounting standards IFRS 16 and ASC 842, which have made thorough accounting crucial for compliance.
Implementing these accounting standards can be an arduous process. As companies deepen their understanding of the time and effort required to implement them successfully, outsourcing may begin to sound tempting.
Relying on others to do what your team is capable of may be considered just as short-sighted as implementing a single-source software over a best-in-breed integration. Depending on other companies to implement your lease administration may have some longer-term implications, which are not necessarily worth the short-term gains.
Before we get into the nitty-gritty of why this is the case, let’s do a quick rundown of the core benefits that drive companies to outsource their lease administration in the first place. Please note, the very things which make outsourcing attractive can be what will cost your team the most in the long run, but more on that below.
Benefits of outsourcing lease administration:
- High likelihood of compliance as you’re hiring a team that is familiar with the accounting standards already and will not need any time to be trained on the requirements.
- Saves you time as there’s no need to go through choosing your software or integrating and implementing that software.
- Get expert advice and remove the burden of complex lease administration from your team.
- Saves you from having to hire new personnel for data entry and administration.
Why lease management software makes more financial sense
If you’re stuck for time, and the deadline is fast approaching, perhaps outsourcing is the way to go. However, as with most situations that lend themselves to outsourcing, you’re giving up all the control and power over your administration processes.
Over time, it will cost you more to have a third-party team do the work for you. If possible, you should look at investing in software and the training needed to implement it. By doing so, you will empower your team to handle the process year in year out.
Outsourcing comes with the advantages of a quick turnover. Still, many of us will be familiar with the cost over time of relying on third-party vendors to provide services your team is perfectly capable of achieving once given the right software and guidance.
Lease management software saves you the expense of outsourcing. By choosing a best-in-breed solution, you can be confident that compliance is enabled within your system. There are many software options out there that have built-in the tools you need to maintain compliance. For instance, if you already work with a Microsoft Dynamics ERP, it makes sense to invest in integrated software built specifically to help you manage the inherent complexities of lease administration.
Many outsourcing companies will be using a system like this to manage your lease administration anyway, so why not take back control of your processes and implement a system yourself. At first, you will have the implementation and training costs. However, five years from now, your team will be reaping the rewards of a fully integrated system that allows them to access centralized lease data, run reports in real time, and confidently achieve compliance standards.
Should you invest in lease management software?
Only you can know the answer. Companies who cannot afford to invest in the right software may initially prefer to outsource complex lease administration. Although it costs more long term, it can save them money when they’ve yet to scale operations. However, it’s important to note that they should do this with a plan to move in-house eventually.
For larger-scale leasing operations, investing in the capacity to handle complex lease administration in-house will be essential over time. Not only will it help you optimize the process and streamline reporting, but give you the ability to gain complex insights into your lease performance so that you’re poised to make strategic decisions when needed.