Nearly every local government or higher education organization has some type of building, land, vehicle, or equipment lease. That’s a lot of commercial leases—making a high-quality lease accounting solution increasingly critical. For both the lessor and the lessee, lease accounting tools clearly show the impact of each lease on an organization’s financial health.
And these tools can do so quickly and accurately, at a glance.
And yet, some organizations are still using cumbersome spreadsheets to manage lease accounting. This can lead to a surprising amount of risk. (Did you know that 9 out of 10 spreadsheets contain errors?)
Today, let’s myth-bust spreadsheets for lease accounting—and talk about how you stand to de-risk your organization by opting for a more streamlined solution.
There are several reasons spreadsheets may not be your best tool for high-quality lease accounting.
Many finance teams, particularly in local and state government, are slow or hesitant adopters of modern technology.
However, some finance professionals and teams are simply unaware that lease management software even exists. Thus, they may not have sought new solutions for managing their leases.
Spreadsheets were indeed once the industry standard. That was yesterday. Today, demand for modern tech solutions is shifting the industry’s norms.
Modern fintech solutions are becoming increasingly commonplace as the industry progresses toward a 21st-century approach to lease accounting. Moreover, these solutions can drastically reduce the time, stress, and resources allocated to becoming compliant.
The common saying, “if it isn’t broken, don’t fix it” is not a concept that should be applied to the use of spreadsheets for your lease accounting.
Although Excel has existed for years, the manual processes spreadsheets require—coupled with a lack of data integrity and version control—have caused data quality and security issues for innumerable organizations worldwide.
Additionally, Excel doesn’t have audit functionality, such as historical tracking and insights into which users made changes.
A typical spreadsheet has restrictions on the number of records it can handle, and does not allow users to link to other spreadsheets and documents. These limitations may not be suitable for performing a detailed analysis or making accurate forecasts about the lease.
Excel is also mostly two-dimensional, which can limit your ability to incorporate multiple variables simultaneously.
Lease accounting is complex and requires finance teams to manage their lease schedules alongside their debt and other long-term payment obligations to produce accurate financial reports and projections. To do this in spreadsheets, teams must learn to correctly and manually input the data.
Technology eliminates manual processes and the solution provider offers a dedicated client success team to help implement and onboard your team.
Managing your leases with the above myths in mind can leave your organization liable in many ways.
Spreadsheets can make it difficult to manage all your obligations across your lease portfolio. Late payments, payment errors, inaccurate reporting, or missed milestones are common outcomes of relying on outdated tools for your lease accounting.
A lease management software solution provides your finance team with detailed, accurate debt and lease schedules and automatically notifies you of important dates, deadlines, milestones, and tasks so you never miss a payment.
For most finance teams, lease data is scattered across multiple spreadsheets with different formats. Decentralized data creates additional opportunities for errors and siloed information (which can cause a slowdown in reporting).
A centralized reporting system ensures one set of accurate, up-to-date data to work from and creates an automatic checks and balances system within your team. Further, having a single source of truth makes it easier for your external team members to access the data when it comes to audit season, for example.
Poor-quality data fosters mistrust—especially in industries governed by strict regulations, like finance. Thus, incorrect, missing, or incomplete lease data is risky for both internal and external stakeholders.
A lack of accurate and complete data creates additional opportunities for error as teams come to accept (and even allow) careless mistakes and negatively impacts the accuracy and transparency of your reporting. A single mistyped number, misplaced period, or incorrect formula can have significant impacts on your data and could ultimately have a snowball effect throughout your reports.
Cloud-based lease management software makes it easy to implement checks and balances to improve accuracy and eliminate opportunities for mistakes.
As lease accounting becomes more critical to financial reporting, spreadsheets no longer provide adequate controls over data security and disaster recovery. Spreadsheet security is typically in the hands of individual users and spread across multiple computers, storage locations, and servers. As such, spreadsheets are frequently printed out, photocopied, emailed to others, and accessed through shared folders. Organizations with financial programs and databases installed locally on individual computers and hard drives expose their critical financial data to potential cyberattacks.
Lease management software provides password-protected system access that protects sensitive data and offers different levels of secure access depending on each user's roles and needs. You can even grant access to external team members such as your auditor, certified public accountant, or financial advisor.
Looking for a lease accounting solution that operates outside of these myths and offers a way around these risks?
You’re in the right place.
See DebtBook’s cloud-based lease platform in action to learn how software empowers finance teams to avoid and overcome common lease accounting risks.
Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, meaning we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.