In today’s technology-driven world, businesses and organizations rely heavily on smart and innovative software solutions to streamline their core business functions and use data to their advantage to make informed decisions and stay ahead of the curve.
While each area of a business reaps the far-reaching benefits of automation, state-of-the-art information systems have particularly revolutionized the way businesses keep track of their finances and stay compliant with financial regulations.
In today’s fast-paced business environment, many businesses prefer leasing critical business assets instead of making heavy upfront investments in purchasing them. Businesses require cutting-edge software solutions to manage these leases effectively and comply with the ever-changing lease accounting standards. This is where lease accounting software comes in.
If you’re a business that engages in many leases, this article is for you. Continue reading as we unveil everything you need to know about the lease accounting software, its uses, benefits, and applications. Let’s get started.
What is a Lease Accounting System?
A lease accounting software is a dedicated software solution designed to help businesses automate all lease accounting processes, manage their entire lease portfolio, keep track of monthly and quarterly payments, and comply with lease accounting standards, such as ASC 842, GASB 87, GASB 96, and IFRS 16.
These dedicated systems make it easier for businesses to streamline lease accounting procedures and allow you to integrate the information with existing ERP systems.
Popular Lease Accounting Software
There are many well-known ready-made lease accounting software available for use. Some of the most popular and widely-used solutions are EZLease by LeaseAccelerator and LeaseCrunch, among many others. While both these software solutions help businesses manage their lease portfolio, the following features make EZLease a better alternative to LeaseCrunch for certain businesses:
- Unlike LeaseCrunch, EZlease is a cloud-based solution that allows users to access the software from anywhere, at any time, and through any device. The cloud-based structure provides more flexibility and scalability to businesses as they can easily adjust the number of subscriptions based on the software’s use.
- EZLease takes a more comprehensive approach to lease accounting and management with added features like global currency support, lease analysis, and sub-ledger accounting. These features are not available in LeaseCrunch.
- EZlease offers multiple report-generation options that are customizable to meet the unique needs of each business.
- The software provides greater insights into financial leases, which helps businesses make informed decisions.
- EZlease allows seamless integration with other essential information systems like enterprise resource planning (ERP), CRM, and procurement modules.
Who Uses a Lease Accounting Software
Any business that leases assets such as operating equipment, vehicles, buildings, property, digital initiatives, and even services can use lease accounting software to manage its lease portfolio. Businesses that belong to certain industries tend to use a lease accounting software more frequently, including:
- Real estate
- Service Providers
- Farming and Agriculture
- Civilian Airline industry
Businesses that use lease accounting software usually deal with many leases or leases with a complex rent payment structure. Apart from the above industries, financial institutes, accounting firms, and lease management service providers can also use lease accounting software to streamline the leasing process, improve data precision, and enhance financial statements’ integrity.
Lease Accounting Software: Features and Functionalities
While the additional features of each lease accounting software vary from vendor to vendor, and the overall functionality depends on a business’s unique needs, here are the most common features that you’ll find in all lease accounting solutions:
The basic feature of all lease accounting software is managing the entire lease portfolio. Lease accounting software allows businesses to:
- Automate leasing processes
- Track lease payments
- Notify of any pending or overdue leases
- Track and update lease terms
- Integrate with online payment systems
- Managing any modifications in leases
- Terminating on-going leases
- Managing lease renewals
This is another core function of lease accounting software. Businesses use lease accounting software to automate all accounting processes involved in lease management, including:
- Acquiring new leases
- Calculating lease amortizations
- Creating payment schedules
- Amortizing lease liabilities
- Recording transactions in journals
- Compliance with lease accounting standards
Lease accounting software is essentially integrated with the main finance database that records all business transactions. It uses this data to generate financial statements for the set periods in compliance with lease accounting standards. These reports include:
- Balance sheets
- Cash flow statement
- Income statements
- Financial budgets
This powerful feature of lease accounting software allows businesses to analyze all lease data and gain insights into different leases, including financial, operating, leveraged, direct, domestic, and international leases.
Businesses can use this feature to determine the return on investments, compare leasing options with purchasing equipment and its long-term benefits, analyze lease terms, and conduct a cost-benefit analysis. This helps businesses make data-driven decisions and identify all opportunities for cutting back on fixed operational expenses and maximizing ROI.
This powerful feature allows businesses to track their lease amortizations independently from other financial transactions, making it possible to have a detailed view of all lease-related transactions.
Multiple Currency Support
Many lease accounting software, such as EZLease, provide global currency support, allowing businesses to manage their leases in different counties and deal with multiple currencies using a single software platform and the same ledger system.
Benefits of Lease Accounting Software
With the advancement of technology, managing leases on spreadsheets is now history. The complexities associated with managing lease portfolios and complying with lease accounting standards have made lease accounting software a necessity for all businesses dealing with many leases. Here are some of the most significant benefits of lease accounting software for businesses:
- It ensures a seamless implementation of lease accounting standards, resulting in increased transparency and reduced risk of fraudulent transactions.
- Decreases financial statement frauds.
- Automates mundane accounting processes and reduces data redundancy.
- The decentralized cloud-based approach helps increase intra-organizational collaboration, improve team cohesion, and foster effective communication.
- Helps businesses keep track of lease contracts and terms, which results in better relationships with vendors and financial institutions.
- Quick access to up-to-date data allows for better business insights and more informed decisions.
- Allows businesses to predict the financial outcomes of lease choices and compare the feasibility of leases over purchasing new equipment.
- Helps businesses meet lease renewal deadlines on time and protect their leased resources without facing any financial loss.
Lease accounting software is a powerful software solution that allows businesses to manage their leases both efficiently and effortlessly. However, before you implement lease accounting software for your business, it’s important to carefully consider various factors such as ease of use, scalability, integration, report generation capabilities, and compliance with lease accounting standards.
After evaluating some key considerations, you can choose the software that best fits your needs.