Effective lease management and compliance with IFRS 16 are essential for manufacturing and logistics companies to optimise asset utilisation, control costs, and maintain financial health. By adopting modern technology solutions, enhancing internal controls, fostering cross-functional collaboration, and staying updated on regulatory changes, companies can enhance their operational efficiency and financial reporting accuracy. These efforts not only help achieve compliance but also contribute to strategic financial planning and operational efficiency, driving long-term success in the competitive manufacturing and logistics market. This article discusses various strategies and solutions that can help manufacturing and logistics companies to overcome the challenges associated with lease management and lease accounting and focus on their core operations and strategic growth.
Conducting lease portfolio analysis
It is important to analyse your lease portfolios to identify opportunities for optimisation, cost savings, and risk mitigation. Evaluate leasing vs buying decisions, renegotiate lease terms, consolidate under-utilised assets, and consider alternative lease structures to align with business objectives.
Adopting lease management software
Implementing specialised lease management and lease accounting software helps centralise lease data, automate calculations, streamline lease tracking and reporting, and facilitate compliance with accounting standards. These platforms often offer features such as lease abstraction, document management, payment scheduling, and lease modification tracking. It is also beneficial if the software aligns with IFRS 16 requirements and can support the industry's specific needs.
Implementing automated lease accounting
Implement automated lease accounting solutions that comply with accounting standards such as IFRS 16 (AASB 16) to streamline lease data capture and calculations and generate accurate financial reports. Set up automated alerts for critical lease events, such as expirations, renewals, and payment due dates. These solutions help ensure timely actions, reducing manual errors, enhancing efficiency, and simplifying compliance with regulatory requirements.
Introducing regular compliance audits
Conduct regular compliance audits to assess adherence to lease accounting standards, tax regulations, and other regulatory requirements. Identify areas of non-compliance, implement corrective actions, and monitor ongoing compliance to mitigate risks and avoid financial penalties.
Providing regular training
Offer ongoing training and education to employees involved in lease management and lease accounting to ensure understanding of regulatory requirements, accounting standards, and best practices. Keeping the team informed about regulatory requirements and best practices helps ensure accurate and compliant operations. This empowers staff to effectively navigate lease-related challenges and make informed decisions.
Leveraging external expertise
It could be helpful to engage with external advisors, such as accounting firms, legal experts, and lease consultants, to seek assistance in navigating complex lease agreements, regulatory requirements, and accounting standards. External expertise can provide valuable insights, guidance, and support in addressing lease-related challenges.
By adopting these strategies and solutions, manufacturing and logistics companies can effectively manage lease agreements, optimise their lease portfolios, streamline compliance with regulatory requirements, and enhance financial reporting accuracy and transparency. This enables them to mitigate risks, reduce costs, and support strategic decision-making for long-term success.
Want to learn more? Download our free IFRS 16 Checklist for Manufacturing and Logistics for tips on compliance!
