When considering the financial impact of your lease portfolio, there are five questions to keep in mind.
Detailed below, answering these questions can help you better understand:
- Your readiness for sustained lease accounting compliance
- How to reduce risks within your leases
- Your preparedness for the next compliance task
- Whether your organization has enough resources
- How to ensure efficiency and accuracy
Here’s how each of these critical points can affect your business’ success in 2023.
1. Is your business set up to sustain lease accounting compliance?
After initial adoption of the lease accounting standards, you will have to stay on top of evolving lease data to stay compliant. Every change made to your leases (such as terminations, expirations, etc.) will need to be tracked.
Without the right tools, this is a complicated process due to the intricacies of the lease terms and the high volume of leases an organization holds. Your business can’t sustain confident, ongoing compliance without proper lease controls.
Software solutions that provide lease administration and lease controls help organizations maintain accurate, up-to-date lease data and confident lease accounting. But not all lease accounting lease accounting technology supports ongoing lease administration required for ongoing lease accounting compliance. Unlike many other software solutions, Visual Lease has built-in lease administration capabilities required to keep businesses compliant.
2. How can your company reduce risk within its leases?
Leases are costly, complex contracts. Having the right controls in place ensures that businesses are equipped with full visibility into these dynamic documents which allows financial leaders to avoid costly risks associated with their lease portfolios.
Without the right lease controls in place, businesses run the risk of making overpayments and missing lease options – both which cost the company and hurt the bottom line. In addition, lacking full visibility into your business’s lease portfolio could result in inaccurate financial reporting which then brings the risk of falling into non-compliance along with being subject to costly audits and fines.
3. Is your company prepared for the next compliance task (ESG)?
As ESG (environmental, social and governance) garners increasing attention and ESG reporting regulations continue to evolve, financial leaders must evaluate their preparedness. In fact, according to a 2021 survey from PwC, 79% of investors identified ESG risk as an important factor in investment decisions.
When it comes to corporate leases, accurate and efficient portfolio management — along with lease optimization — can help companies comply with ESG priorities. For example, businesses can evaluate leases and lessors to show they are good ESG partners with greener building or equipment initiatives in place.
Setting up the right data-gathering methods and technology also allows companies to constantly evaluate their leased asset portfolio for areas that can be consolidated and reduced, creating a more sustainable portfolio.
4. Do you have enough resources to support lease accounting compliance and optimization?
With the current shortage of finance workers (exacerbated by the Great Resignation), increasing compliance regulations and higher workloads, your business must prepare to enable teams for lease accounting and management success. Now more than ever, it’s important to invest in streamlined communication processes among departments as well as the right technology.
5. How can your organization increase efficiency and ensure accuracy?
Automation can help save businesses both time and money. Lease accounting involves complicated calculations that, if handled incorrectly, can lead to expensive mistakes. Automation serves to reduce the risk of costly human errors, avoid additional audit fees and streamline operations. In this way, integrations with the right lease accounting and management partners, such as Visual Lease, can help set up your company for lease portfolio success in 2023.
Whether your lease accounting goals for 2023 involve saving money on audits or increasing efficiency while maintaining compliance, it’s important to have a plan regarding how you will attain them. And at the end of the day, it’s the right combination of people and technology that will best help you achieve your lease accounting and optimization goals.