Introduction
The vehicle and equipment leasing industry is growing rapidly, driven by changes in government policies relating to lending by banks. Compliance remains a challenge with the introduction of accounting standards ASC 842 and IFRS 16. Manual processes are error-prone and inefficient. Modern lease management is built on advanced business software solutions. These solutions enable lessors to streamline their core processes such as managing payment and depreciation schedules. By automating accounting, lessors are able to achieve accurate and timely financial reporting and audit capabilities.
The Transformation of Lease Accounting through Business Software Solutions
Automation of Lease Management and Financial Reporting
Lessors can streamline and standardize their processes by adopting process automation in business software solutions. Processes like generating invoices, collecting and applying payments, calculating depreciation and modifying leases may be automated, reducing manual intervention.Lessors maintaining large portfolios can use business process automation to minimize errors, increase efficiency, improve customer service while streamlining accounting, financial reporting and audit processes.
Compliance with Accounting Standards
Compliance with accounting standards like ASC 842 and IFRS 16 is critical for lessors and lessees. Noncompliance leads to penalties and use of resources to rectify errors.
Business software solutions need to have built-in compliance features, enabling users to focus on lease-related activities that automate accounting and financial reporting.
Lessors often use multiple software solutions to meet their full operational needs. They could include sales management, origination systems, and general ledger systems. Integrating these systems with lease accounting software is essential to generate accurate financial reports and maintain a streamlined, automated process that can be audited.For example, vehicle lessors need integration with dealer management and vehicle maintenance systems, while captive lessors might integrate with order management and inventory systems. Integration is critical for automated processes to run smoothly and minimize errors.
Impact of Technology on Lease Accounting
Cloud Computing
The need for physical proximity has been largely eliminated with the adoption of cloud-based software solutions. Lease accounting software now provides real-time and accurate information from any location.Lessors with multiple branches using a cloud-based system can access lease information in real time across all their locations. Data access can be customized based on user roles or business lines, ensuring financial data remains secure while offering analytics in real time.
Artificial Intelligence (AI) and Machine Learning
AI enables advanced analytics and predictive maintenance for leased assets, optimizing performance. Lessors who manage large, complex portfolios benefit from real-time reporting and better customer insights powered by AI.
Automation and Workflow Optimization
Automating business processes helps lessors reduce errors and streamline reporting. For instance, updating lease terms to recalculate payments and income is common, and errors in these calculations could impact credibility. Automation reduces such risks.
Benefits of Business Software Solutions
● A survey by PwC found that 65% of companies using business software solutions reported a significant reduction in the time spent on lease management tasks, with some organizations reducing administrative workloads by up to 50%.
● According to a report by Deloitte, 70% of businesses that implemented lease accounting software saw improved compliance with IFRS 16 and ASC 842 standards within the first year.
● Gartner reports that companies using AI-powered business software solutions for lease accounting have seen a 35% improvement in predictive maintenance accuracy for leased assets.
Challenges in Implementing Business Software Solutions
Initial Costs and Budget Concerns
Small and medium-sized lessors question the costs of implementing a new lease accounting system. Weighing the time and cost against spending time growing the business. Lessors need to understand they will limit their capabilities to grow without these solutions.
Resistance to Change
Even when existing systems are inefficient, users may resist adopting new technology. An effective way of overcoming this resistance is to develop and run comprehensive training programs.
Data Migration
Moving data from old systems to new lease accounting software may need more of a transformation than migration. Solutions with well-defined migration programs help streamline the process by minimizing data inaccuracies and operational disruptions.
Conclusion
Business software solutions are the tool being used to drive a revolution in lease accounting for vehicle and equipment lessors impacting process automation, improved compliance, and better financial controls. Lessors realize the benefit of reducing costs, improving decision-making, and maintaining their competitiveness in the market.
Cloud-based solutions and new technologies enable lessors to remain competitive. In addition to enhancing profitability, these solutions provide new options for asset tracking, maintenance, and customer service.
