In our previous articles, we discussed the benefits of automation in lease accounting, focusing on the ways it helps achieve efficiency and accuracy and promotes compliance with the current lease accounting standards, namely, IFRS 16 (AASB 16). In the third instalment of our series on the impact of automation in lease accounting, we shift our focus to two other critical aspects: improved visibility and cost reduction, exploring how lease accounting automation tools help not only streamline processes but also provide more precise insights into lease portfolios and significantly reduce costs.
Visibility and reporting
Centralised information for better analysis and decision-making
One of the primary advantages of lease accounting automation is the centralisation of lease information. This consolidation not only simplifies compliance reporting, such as lease liability calculations, but also enables the development of other analytical tools and datasets, offering comprehensive insights into the lease portfolio. Enhanced visibility of the lease portfolio plays an essential role in data-driven decision-making, both from an overall asset management perspective and in daily operational activities. The advantages of this visibility extend beyond the accounting department, supporting both finance professionals and lease managers.
For example, in the retail sector, where managing many leases is common, retail lease management software provides a clear overview of the entire lease portfolio. Automated systems allow retailers to track lease terms, renewal dates and rent escalations across multiple locations, offering critical insights for expansion or consolidation strategies. On the other hand, healthcare lease management software facilitates better management of equipment and property leases for healthcare organisations. This improved visibility aids in compliance with regulations and helps ensure optimal utilisation of assets, which is essential in an industry where equipment and facility usage directly impact patient care.
Tailored reporting for diverse needs
Lease accounting automation enables the generation of customised reports and insights tailored to the specific needs of different businesses or teams. These reports can be set up as templates that can be reproduced consistently and automatically, providing quick access and highlighting valuable information in a format that is easy to understand. This capability helps executive teams and other departments have access to the latest information at all times, allowing for quick, informed decision-making based on real-time data.
This feature could be particularly valuable for a transportation company specialising in freight and passenger services, with a complex set of leased assets, such as vehicles, railway equipment and terminal facilities, and operations spanning multiple countries. Implementing an automated lease accounting system with capabilities for tailored reporting and configuring it to meet the diverse needs of different regions and asset types can help the company align with global financial reporting requirements. By providing customised and relevant information, automation tools enable companies to comply with accounting standards and leverage lease data for strategic advantage.
Cost reduction
Automating for efficiency
The efficiency gained from automation has the potential to lead directly to cost savings. Minimised errors, increased reliability of information and heightened accuracy in financial reporting all contribute to more streamlined operations, reducing the need for costly corrections and redundant processes, and alleviating the financial burden on the company. The overall purpose of lease accounting software is to achieve these efficiencies while helping companies with maintaining the high standards of accuracy and compliance.
Manufacturing companies, for instance, often deal with complex equipment leases. Automation simplifies the tracking and management of these leases, reducing the time and labour involved in manual processing. This leads to reduction in cost, allowing for more investment in production and innovation. Similarly, educational institutions, in particular, universities with extensive campus facilities, find that education lease management software reduces the administrative burden of managing multiple leases. This efficiency can translate into cost savings, enabling institutions to allocate more funds towards educational programmes and student services.
Reducing resources and time
Lease accounting automation plays a pivotal role in reducing the resources and time spent on routine activities. By handling the basic and repetitive processes, it frees up accountants and finance professionals to focus on more complex and value-adding tasks. This shift from manual, time-consuming tasks to automated, efficient processes is a significant driver of cost reduction. Most importantly, it is not just about saving time; it's about reallocating resources to areas where they can make a more significant impact.
In the hospitality industry, for instance, a hotel chain with numerous properties and equipment leases can greatly benefit from hospitality lease management software. By implementing a system to handle tasks such as payment scheduling, tracking lease terms and monitoring compliance with reporting standards, the financial team can shift their attention to strategic areas like enhancing guest services, refurbishing properties and expanding into new markets. This redistribution of resources from routine administrative tasks to key growth and service improvement areas is vital in the competitive hospitality sector, driving innovation and business expansion.
As the business world continues to evolve, the need for better visibility and cost-efficiency becomes increasingly important. The transition to automated lease accounting systems marks a significant step forward in managing lease portfolios more effectively and efficiently. By enhancing visibility into lease data and reducing operational costs, automation not only simplifies lease accounting but also transforms it into a strategic tool for business decision-making. As companies continue to navigate the complexities of the current economic climate, those who leverage these technological advancements will be better positioned to thrive in the dynamic world of financial management.
Want to experience the benefits of automation for your company and sector? We are happy to answer any questions you might have. Book a demo to see our comprehensive lease accounting and lease management software in action!
