Real Estate and Lease Accounting – Consolidating for ROI
By Bryan Seck, LeaseAccelerator
Most organizations are looking for ways to take cost out of their business processes by reducing the number of software platforms they’re using. One common opportunity for consolidation is leased asset accounting and lease administration. Real estate leases and equipment leases are often managed in separate systems, leading to inconsistent data, audit risks, and higher costs. Bringing the two solutions together can drive ROI and cost savings. Here is an introduction to that process and a few considerations to keep in mind.
Real estate and lease accounting consolidation combines real estate administration and the financial impacts and transactions of your property portfolio, combining accounting information from multiple properties/assets into an integrated solution. This helps by:
• Allows real estate administrators to enter financial information and process invoices without having to make accounting-significant decisions.
• Ensuring compliance with Generally Accepted Accounting Principles (GAAP).
• Providing transparency to stakeholders.
• Enabling easy comparison of results across entities and property location/sites.
• Improving efficiency in financial reporting for your real estate portfolio.
Real estate lease administration automates many of the tasks associated with managing your real estate portfolio. An integrated solution can also share accounting-significant information and transactions that originate through real estate tasks and actions. This information can be used by the accounting team to generate journal entries, perform financial consolidation, and reporting. For example, real estate lease administration software can help you manage property costs and invoices, calculate important financial metrics (such as lease obligations and straight-line rent expense), generate reports on demand or on a schedule, get portfolio analytics, and provide dashboards for easy visualization of results.
Most real estate leases have many different clauses and terms that are relevant for accounting. Some of the key accounting controls and data fields that should be captured in a lease administration solution include:
• Contract commencement date
• Contract term
• Rent amount (and any changes/adjustments over the life)
• Security deposit
• Common Area Maintenance (CAM) charges
By capturing all of this data in one place, you can reduce errors, simplify the process of managing your real estate lease portfolio, and ensure a single system of record for real estate properties.
Another important consideration for real estate and lease accounting is capturing the relevant data for each lease event. A lease event can be something like starting a new lease, a rent increase, a change in CAM charges or the expiration of a lease. Capturing this data and keeping it updated is critical for maintaining accurate financial records.
Combining lease administration and lease solutions can also streamline the approval workflow for new leases, lease amendments and other changes. With automated workflows, all approvals are captured in one place. Real estate administrators can manage critical dates for their properties, process invoices, and analyze lease data, all with management oversight.
Finally, you’ll want to consider whether the software offers customized reporting and analytics. This can be helpful for generating reports on demand, understanding lease trends over time, or comparing results across business units.
With the right, integrated solution, you can streamline your real estate and lease accounting processes, improve financial visibility and control, and save time and money.
Bryan Seck is SVP, Global Alliances and Real Estate Technology at LeaseAccelerator.