You have a lot going on. You’re considering hiring an auditor and/or consulting firm to handle the massive transition to FASB Topic 842 and IFRS 16 since you just don’t have the time, resources, or manpower in-house to do it alone. Hiring an auditor or CPA can help you save time and have access to knowledge that you might not have otherwise. The effects of ASC 842 are far-reaching, adding to or exacerbating several challenges for in-house lease management. Among these are:
Lease Accounting Strategy:
Procedures for decentralized lease management:
A company’s leases and contracts that may contain leases are often not up to date. The ability to sign equipment leases is typically delegated to individual departments, contributing to the fragmented nature of the organization. Because of ASC 842, the finance team will probably be in charge of handling lease administration, with the necessary paperwork going through central accounting first.
Organizational shifts required by ASC 842:
ASC 842 may require businesses to revise their lease inventory procedures if they haven’t already done so. This is because many equipment leases aren’t properly recorded. To handle paperwork, deadlines, NPV calculations, schedules, and disclosures, businesses may need to invest in new software. Detailed documentation of leases is now required by the new guidance, but many companies lack the technical accounting knowledge to comply.
Workload and available timeframe:
Many businesses are struggling to complete the necessary tasks in time, such as performing a lease inventory and abstraction and training employees on the FASB’s new requirements. In addition, businesses need to develop data migration and ongoing lease management strategies, in addition to plans for software implementation and training.
In light of these difficulties, lease accounting outsourcing is gaining popularity among companies in the middle market. Successful adoption of ASC 842 necessitates the hiring, training, and management of internal personnel as well as the development and implementation of proprietary technological applications.
The following are some of the primary advantages that can be gained by outsourcing the lease accounting function as a means of overcoming the common challenges encountered by internal middle market accounting departments:
Lease accounting outsourcing strategies to implement:
Invest in a lease accounting system to facilitate accounting and management tasks in your business. There is no harm in employing an accounting firm to help with the change. Get the best lease accounting software for your business and give it to your employees to use.
Lease accounting cannot be treated as a generic process. When you pair the knowledge of outsourced auditors with the software of your choice, you can reduce business disruptions to a minimum.
Using your software, you can gain instant access to reports and leasing paperwork:
When your business uses software, getting the reports you need takes only a few minutes. Not only will this save you time, but it will also make it easier for departments like procurement and legal to get their hands on important lease documents.
Make sure your staff knows the growing needs:
When considering a transition outsourcing partner for your business, look beyond the basics of regulatory compliance. It is crucial to have a complete understanding of all leases, including their beginning and ending times, the amounts owed, auditing and reporting efficiencies, and whether or not any leases are duplicated.
The new requirements are permanent. You and your coworkers need to learn more about them because they can affect your future purchasing and accounting procedures. Although you can keep depending on an outside company for help, remember that you are the only one who truly understands your company. Long-term success can be achieved through the cultivation of one’s innate abilities.
Just because your business is on the smaller side is no reason to ignore the need for leasing accounting software:
A software solution is necessary regardless of the size of the business. The necessity is determined by the quantity and sophistication of your company’s leases. Since most advisory firms already use software to handle your lease accounting, you should, too.
More and more companies are realizing how much work is involved in adopting the new lease standard. As our comprehension of this topic grows, our lead time for putting it into action decreases. If you outsource lease accounting, you won’t have to worry about selecting new software, finding time to train employees, or hiring new personnel to meet the new standard.
Every lease accounting data management issue can be solved with our assistance, whether you want to streamline the entire lease data management process or just need some individualized assistance along the way. Because of their extensive experience in the real estate industry, Springbord can assist businesses in improving the efficiency of their lease data management and portfolio performance.