Transition to ASC 842 is inevitable. The only way businesses can do is to prepare for the transition and do it, if they haven’t already. Lease-related data gathering and processing are difficult, to begin with. So, it’s safe to say that new regulations won’t gain much praise from people who will be facing it on a daily basis. Increasingly demanding data collection with regards to more detailed bookkeeping for operating lease liabilities will take their toll. Private companies can struggle with the transition and the implementation of the new standard. This is why SOFT4Lessee prepared a guide on how to make data gathering for ASC 842 simpler and more efficient.
Begin by implementing a process for gathering lease liability accounting data
It all should start from the top, not the other way around. If there isn’t a clear and outlined method for doing things, your staff will definitely struggle. At least more than they should. Management or senior accountants need to have insights into the upcoming challenges and understand how to solve problems, which might arise along the way. If the team doing lease liability calculation is well organized to do their job, you can expect much higher efficiency and better overall results, right from the get-go.
How should you implement and organize data gathering? Begin by sorting and grouping existing leases. This job is set to separate those projects from one another in terms of demands for administrative labor. So, you should strive to optimize workload by delegating more difficult jobs to senior or more experienced staff.
Next up, emphasize the link between various data points and break them down into groups and individually. Luckily, modern accounting software has built-in features that can help you automatically calculate certain figures, related to lease liabilities accounting for ASC 842. Update records accordingly, establish links between different data points, and collect information from outside the contract (e.g. options for purchase).
The process could be created by consulting with your accounting staff.
Your efforts should focus on both present and future contracts
It’s easy to think that a new path should only concern upcoming contracts and deals of the future. But, keep in mind that you should strive to optimize calculating operating lease liabilities and do wholesome lease liabilities accounting not sometime in the future, but right now. This means that your business should focus on present contracts as well as the future. If the process which you’re trying to introduce will work best in 5 years’ time, after you successfully complete the re-vamp plan for your organization, that’s not good enough. You must look at it and make some sort of compromise between benefits for right now and value for the future.
Let us elaborate even more. It seems common sense to plan for the future, as everything changes so quickly. However, accounting is a very standardized set of tasks and it’s rarely revised. Besides, this position rarely creates any added value. So, you must strive to seek cost-efficient solutions right now, not something that will only pay off 2 years into the future.
Gathering data should focus on existing contracts as well. So, you can do a thorough audit and see whether some calculations are outdated or whether you’re excess spending paying for things that are the responsibility of your clients, etc. Depending on the size of your portfolio, a thorough audit and a focus on the optimization of present-day lease accounting management can save you from unnecessary six-figure expenditures (or even more).
Allocate enough resources from the start
As we’ve mentioned, gathering data for lease-related accounting is quite demanding. It’s time-consuming, requires a tremendous amount of detailed administrative work, and competent staff behind it all. It’s good if you can automate some calculations (e.g. lease liability calculations) but not everything can be done automatically, without the involvement of a human.
This is where your insights should come into play. All departments who are related with leasing should be on board to help and chip in with their part towards a more fluent overall experience. The IT department, procurement, and other teams within your organization should be at stand-by to help out because the success and ease of accounting affects them, too.
How much resources are enough? Well, sometimes the answer is “More than you have at your disposal”. This is why it’s not uncommon to see companies hiring consultants and 3rd party solution providers to assist during a transition to a new software solution or in this case, an accounting standard. Luckily, most providers and developers of software solutions are prepared to carry out training for your staff. This means that you can avoid hiring expensive consultants.
Utilize software solutions
In today’s day and age, it’s easier to do a lot of things thanks to computers and digitized solutions. The main area where software helps businesses is data processing and data management. Now can you see how dedicated software might help with ASC 842 accounting standard?
Software solutions like SOFT4Lessee are tailor-made to suit the needs of lease companies and businesses with dedicated lease departments. They have built-in calculators to remove a lot of mundane manual calculation, it’s fully compliant with new regulations and can be adapted to your needs individually. Thanks to it being based in the cloud, SOFT4Lessee can be implemented without any downtime. This means that your staff can gather data without the usual disruptions and sometimes even complete paralysis which occurs when new software is being installed and set up internally. Software for lease liability accounting has unique modules that help accounting staff monitor and keep track of present data and future estimates. You can input and manually change various points accordingly or make some inputs and have the software do it automatically, to adjust risk evaluation and make the necessary preparations. With the fast-changing landscape around, your lease department or whole staff can definitely benefit from having dependable software for gathering data related to leases.