As companies rush to implement the new lease accounting standard before the end of the year, many are still busy trying to choose the right lease software solution.
Deloitte leaders Jeanne McGovern and Sean Torr shared their advice on things to consider when evaluating leasing software and systems, in a phone interview with Bloomberg Tax.
Getting Management Buy-In.
Does acquiring new accounting software always become a top spending priority in your budget? Probably not.
McGovern and Torr believe that management needs to be aware of the leasing standard’s complexity and not underestimate the time and effort required to implement it. Strong support from management can take a company through the implementation journey, and walk it [more effectively] through the implementation timeline--as there are only a few months left for compliance, Torr said.
McGovern emphasized the challenge of lease data gathering that companies are facing. “Once management understands the amount of data a company needs to collect on each lease, they will realize having appropriate lease accounting software is really important,” she said.
“As many companies don’t have an existing lease system, capturing the [necessary] data would be a challenge. But it is also an opportunity for companies to rethink their lease strategies, and what [in their current system] needs to change.” McGovern said.
Choosing a Lease System.
With many software options in the market, there are many variables companies have to consider when choosing the one that is most suitable for them.
First of all, Torr said, companies need to keep in mind that they are not just looking for a “one-time” implementation tool, they are looking for a long term solution. Companies should be looking for software that “provides lease administration and lease asset management solutions--a system that will still be relevant after the implementation of the new lease accounting standard [is completed],” he said.
For global and multinational companies, McGovern said that although the international lease standard (IFRS 16), and the U.S. standard (ASU 2016-02), are mostly converged, there are still differences. She said that companies should consider tech that can handle both standards so that companies can more easily meet the requirements under both.
McGovern and Torr also said that company-specific features shouldn’t be neglected. For example, a company shouldn’t be looking for a software that deals with real estate leases if it has mostly equipment leases; if the company is more decentralized across the globe, it shouldn’t be looking for a centralized solution.
Smooth Implementation Takes ‘A Whole Village.’
The implementation of lease software is not a “one-person” job. McGovern said that it requires regular interactions between different teams, including legal, IT, asset management, and financial reporting.
Torr said “don’t forget to take into consideration stakeholders’ input.” According to him, stakeholders (i.e., legal, IT, asset management, etc.) are the real users and it is critical to take their feedback into consideration.
McGovern and Torr emphasized that time is running short. McGovern said that companies need to start trying different systems and find one for themselves. However, they also shouldn’t rush through and lose sight of the long term.
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