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Technology LeaseAccelerator

Effective Leasing Strategies for the “New Normal”


Sponsored by LeaseAccelerator

Leasing can help balance the “new normal” of a remote workforce and constant change. To ensure long-term compliance going forward, read how automating the lease lifecycle can improve effectiveness.

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Just a few months ago, the business landscape changed overnight – everyone went remote suddenly, real estate usage dramatically shifted, new equipment requirements appeared, and cash management became even more critical. This created a new set of rules for leasing, powered by a remote and decentralized workforce, and new opportunities to drive digital transformation using leasing as a catalyst

Because of these changes, financial leaders from corporate controllers and treasurers to CFOs have faced significant challenges such as remeasurements, reassessments, and deal modifications. Accurately reflecting changes while staying compliant with the lease accounting standards has become highly complex for most entities. This is made harder because most leasing data is decentralized as leasing is primarily a local delivery service. And, adding another layer of complexity, the way deals are changing constantly in the current environment makes it hard for teams to keep up.  

Even as compliance standards evolve and deadlines move, the remote workforce has become the new normal and constant change continues to have a broad impact across most organizations, making it harder to stay in control. Businesses can no longer continue operating in a holding pattern that relies on manual lease management practices and spreadsheet workarounds. For success now and post-pandemic, firms need to take a lease lifecycle approach which starts at the lease vs. buy decision to the last payment made. With the below steps in place and the right enterprise-grade, cloud-based platform, firms can make working in this new normal more effective by proactively maximizing the benefits of their lease strategy and portfolio while driving savings and reducing risk.

Adjusting to the “New Normal” through the Lease Lifecycle

Lease Sourcing: Now more than ever, a strong lease versus buy analysis is critical not only for fiduciary responsibility but to enhance business operations. Prior to committing to a lease, businesses will want to leverage a lessor network to ensure they are receiving the most favorable rates. Increasing the competition for your leasing business will put you in control and yield benefits throughout the life of the lease. Starting leases right will set the tone for the rest of the lifecycle.

Lease Management: Decentralized workforces have upended traditional data collaboration processes. With stakeholders and data now spread across systems and teams, gathering details on embedded leases is more time-consuming than ever before. Also, the voluminous lease changes and revisions to estimates have presented a significant challenge to lease accountants, corporate controllers, treasurers, CFOs, and their financial reporting teams. The more people and steps included in the accounting process, the more inefficient the process becomes and the more likely it is to introduce errors and therefore increase risk. With a centralized database and standard templates for data gathering, even dispersed lease teams can automatically apply consistent policies and ensure continuous data quality.

Lease Accounting:  A virtual monthly close is the new normal for the majority of organizations and on average, the process takes a week or more. Most of that time involves manually checking and rechecking information with stakeholders, which can increase risk and cost. Many organizations are also facing situations where leases were captured incorrectly, or new information comes to light after the books have closed. In some cases, organizations are trying to manually adjust entries, reverse errors, and reconcile reports which is further impeded by their remote workforces. To succeed now and post-pandemic, automation is needed to take the time, cost, risk, effort, and stress out of the close process. By implementing the right automated lease lifecycle platform, businesses will remain in compliance through rapid changes while meeting audit requirements and being equipped with the visibility and control needed to optimize their core processes.

 

Controls, Reporting & Disclosure: Faced with significant challenges from remeasurements, reassessments, and deal modifications due to lease changes, businesses are struggling with the added complexity and velocity of changes to lease portfolios. To support financial statement footnote disclosures, auditors look for back-up substantiation and audit evidence, including automated reports that prove the application of policies and share justification documentation. Every time you change your formulas in a spreadsheet, it creates audit questions. Instead, if you take a lifecycle approach to lease management, you’ll have a subledger that retains the history of all transactions and provides an audit trail to help speed up the month-end close process. A centralized database of lease data and contracts reconciled allows you to generate your debits and credits to match whatever accounting standards apply.

End-of-term Management: Even before the pandemic, it was easy for a company with thousands of leases to lose visibility of them over their lifespan. Leasing portfolios often include leases that have continued long past their original terms and useful life, accumulating unwanted fees. In today’s environment, with warehouse and offices closed and workforces remote, companies have significantly struggled with lease management due to the challenges around returns, purchases, and deliveries. With a lease lifecycle management approach, businesses have a centralized view of which leases are coming close to end-of-term so they can decide if they want to return, renew, purchase, or refresh. With end-of-term management processes in place, businesses can take advantage of opportunities to refresh equipment with short product lifecycles, such as computers and other technology.

Strategic Evaluation: At the end of every lease and before starting each new lease, businesses need to assess what went well and what needed improvement to make better decisions for the next pass through the lease lifecycle. This can lead to adjustments in lease vs. buy strategies, stakeholder KPIs, and overall policy and governance changes. Leveraging these insights will make leasing programs more effective in the long run.

Automating the Lease Lifecycle 

By implementing the right automated lease lifecycle platform, businesses are equipped with the visibility and control needed to optimize their core processes and effectively manage the complexities of lease portfolio management from end-to-end. The challenges created by the “new normal” are easier to handle with a cloud-based lease lifecycle solution designed to support a decentralized workforce and assets. Then, leasing becomes a key component of digital finance transformation, driving improved cash flow, strategic capital management, better governance and valuable insights, delivering a significant impact to a business’s bottom line.

For best practices on how to improve leasing, download 15 Critical Success Factors for Your Equipment Leasing Program or register for a LeaseAccelerator demo today.