To say lease accounting software has its challenges is a glaring understatement. More than 720,000 UK businesses are at risk of financial penalties or fines due to non-compliance with new lease auditing regulations, according to research published earlier this year. Things might be simpler if keeping up with new regulations were the only challenge, but as many finance teams are well aware, this is just the tip of the iceberg.
Many processes involved in lease accounting are complex and time-consuming, and if organisations have small teams who rely on manual processes, there’s also the risk of errors creeping in. The result is a snowball effect that could have disastrous consequences. Saving time and reducing risk, lease accounting software from FMIS is the solution.
Lease Accounting Challenges and Solutions
The challenges of lease accounting are many, but they’re not insurmountable. Take a closer look at the most common issues and how your organisation can overcome them with reliable software.
Complex Calculations
The challenge of computing complex calculations is amplified significantly if organisations still do this manually. It’s difficult enough trying to keep a lid on this aspect of lease accounting when employees need to deal with tens or hundreds of leases, but the reality for many organisations in the UK is that their finance teams need to manage thousands of leases with different payment structures.
Along with requiring many hours of work, performing these calculations manually comes with the risk of errors that affect payments, receipts, financial reporting, and compliance. FMIS’ lease accounting software ensures accuracy, consistency, and compliance with the latest standards while saving time by automating these calculations, regardless of the asset portfolio size.
Using this software, your team can automate actuarial interest charge calculations, track early settlements and mid-term adjustments, and generate general ledger postings and schedules by calculating right-of-use asset and lease liability. Additionally, it’s possible to automate actuarial interest charge calculations and close periods, preventing reconciliation issues.
Keeping Up with Regulatory Changes
Of the many UK businesses at risk of financial penalties mentioned above, 24% knew nothing about the new regulations. Unsurprisingly, keeping up with changes in regulatory standards such as IFRS 16 and ASC 842 can be difficult, especially when changes require a very different approach to what was used before.
The most recent changes aim at ensuring greater transparency – a noble intention, but one that comes with a learning curve and makes finance teams’ workloads heavier and more complex, especially if they’re over-reliant on spreadsheets. FMIS’ lease accounting software makes it easier to stay on top of regulatory changes. The software ensures compliance with the latest IFRS and FASB lease accounting standards while simplifying lease administration. Thanks to software updates in response to regulatory changes, there’s no chance of your organisation suddenly finding itself faced with compliance issues.
Time-Consuming Reporting and Disclosures
Lease accounting reporting and disclosures can be lengthy processes at the best of times, especially when organisations rely on manual lease management. One reason for this is that the data required for reporting and disclosures isn’t always readily available. The time it takes finance teams to sift through spreadsheets for relevant data often comes at the expense of analysis, which is usually to the business’ detriment.
FMIS’ powerful lease accounting software offers all the financial reporting required for IFRS 16 and ASC 842 compliance. Your team can automate reporting to produce full lease detail reports, lease summaries for all contracts, and lease values by period in Excel or PDF formats. They can also export data from the software. In contrast to the many hours required by manual reports and disclosures, software generates reports within minutes.
Data Transparency and Audit Trail Challenges
Audit trails do more than support compliance with accounting regulatory requirements. They help organisations identify errors and discrepancies, and prevent fraud, money laundering, and other illicit activities. However, audit trails are only helpful when data is transparent, but this is seldom the case when lease accounting is done manually.
Regularly changing, copying, or updating spreadsheets makes the audit trail more difficult to follow, especially if external file links break or key formulas are overwritten or deleted by mistake. Organisations then find themselves struggling to verify or justify their calculations, which could leave them facing penalties.
FMIS’ lease accounting software supports internal controls and reduces the risk of non-compliance by providing a full, clear audit trail. Finance teams, regulators, and auditors can make sense of and verify every calculation, change, and approval quickly and easily.
Enhance Your Lease Accounting with FMIS
Penalties for non-compliance don’t only eat into your organisation’s profits. They increase workloads and raise the spectre of doubt, creating an impression that potentially damages your reputation among vendors and customers, and that’s the last thing a business needs.
Save time, reduce risk, and protect your organisation by relying on FMIS’ lease accounting software. It’s the solution that streamlines compliance, automates reporting, and ensures accuracy across every stage of your lease management process.
Read More on Birmingham Journal
