Lease accounting software enables businesses to stay compliant with accounting standards like ASC 842 and IFRS 16, and make informed decisions by streamlining accounting processes. It also provides detailed insights into payment schedules and lease agreement renewal or termination to reduce manual errors and improve financial transparency.
Lease accounting can be complex and tedious for businesses with several rental assets to take care of, especially when transparency and financial regulations are required in reporting.
Not only that but maintaining compliance along with accurate accounting information on a large scale can become a significant challenge for the leasing businesses. That being said, if you're struggling with managing leases, lease accounting software can be a valuable tool to help you out.
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These software applications help businesses in reducing errors, adhere to compliance requirements, and optimize accounting processes. So, in this blog, we will take a look at everything you need to know about lease accounting software before outsourcing a development team to build one for you.
What is Lease Accounting Software?
Lease accounting software is a platform that provides essential tools to property dealers, realtors, and other asset holders for managing all transaction-related operations while leasing. It automates various manual accounting tasks like recording and analyzing transactions, generating financial reports, and maintaining regulatory compliance issues.
With its advanced features, tools, and dashboard, lease accounting software allows businesses to reduce manual errors and improve financial transparency. Apart from that, this software also provides detailed insights into payment schedules and lease agreement renewal or termination.
In simple terms, by streamlining accounting processes, lease accounting software enables businesses to stay compliant with accounting standards like ASC 842 and IFRS 16, and make informed decisions.
Defining ASC 842 and IFRS 16
You might be wondering what ASC 845 and IFRS 16 accounting standards refer to. Therefore, to make it easy to understand we have shared their not-so-standard definitions below.
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ASC 842: This is an updated US GAAP (Generally Accepted Accounting Principles) lease accounting standard that replaces ASC (Accounting Standards Codification Topics) 840 governed by the Financial Accounting Standards Board (FASB). It became effective in Dec 2018 for the public and in December 2021 for the private sector. Under this topic, businesses are required to bring almost every lease on the balance sheet for tenants (lessees). Additionally, businesses are also required to disclose lease obligations in their financial statements’ footnotes.
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IFRS 16: IFRS (International Financial Reporting Standards) 16 is the financial reporting standard that the IASB (International Accounting Standards Board) governs. Similar to ASC 842, IFRS 16 also aims to bring leases onto the balance sheet except for lessees (tenants) can use lease accounting on intangible assets covered by IAS 38 (Intangible Assets) other than rights held under licensing agreements under IFRS 16.
Benefits of Lease Accounting Software
Some of the advantages that a business can leverage from lease accounting software are as follows:
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Simplified Auditing: Auditing is one of the most complex accounting processes that consume a lot of time and effort. However, having lease accounting software can streamline and simplify the auditing process with readily available well-organized, and accurate lease data.
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Better Data Management: Efficient lease data management is crucial for compliance with accounting standards. Being a centralized platform for recording and accessing all the data, lease accounting software streamlines the process, reducing manual work and errors while improving organization and efficiency. This allows businesses to free up time and resources for other critical activities.
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Compliance Adherence: Keeping up with the latest financial compliance standards can be difficult as they increase the complexity of lease accounting. Having lease accounting software equips businesses to align with the standard by automating the tracking and reporting of lease information and providing tools that help stay relevant to regulatory compliance when new measures are introduced. As a result, minimizing the risk of non-compliance penalties.
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Enhanced Budgeting: Storing lease-related financial and other data on a centralized platform, such as lease accounting software, enables businesses to analyze it more easily for accurate financial budgeting and forecasting, leading to better decision-making.
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Higher Accuracy: The automated complex calculations and journal entry executions feature in lease accounting software support businesses in reducing human errors and inconsistencies while increasing financial data accuracy.
Cost to Develop Lease Accounting Software
The cost to develop a lease accounting software can range anywhere from 30,000 USD to 400,000 USD. The variation in the software development cost entirely depends on the project’s complexity, compliance, features, functionality, third-party integrations, and number of resources, to name a few.
Frequently Asked Questions (FAQs)
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What is Lease Accounting Software?
Lease accounting software is a platform that provides essential tools to property dealers, realtors, and other asset holders for managing all transaction-related operations while leasing.
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What are the must-have features of lease accounting software?
Some of the features and functionalities a lease accounting software must have are centralized lease management, automated lease calculation, customizable financial reporting, compliance tracking, lease analysis, multi-currency support, sub-ledger accounting, document management, audit trail, lease renewal alerts, tenant management, and cross-platform accessibility.
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How to get a lease accounting software developed?
To develop customized lease accounting software you need to outsource an experienced software development company like Decipher Zone. However, before moving ahead you must conduct a comprehensive market analysis to discover the requirements and challenges that should be addressed.
Once you are done with requirement gathering and market analysis, you will have to connect with experts from an outsourcing service provider and discuss the architecture, design, tech stack, functionality, and integration of the software.
Next, the project manager will analyze your requirements, and share a detailed proposal including the number of required resources and deliverables for approval from your end before assigning the project to experienced developers
From there on, the programmers and UI/UX developers will design, build, test, improve, deploy, and finally launch the lease accounting software in the market.
Bottom Line
The global market size of lease accounting software is expected to grow at a CAGR of 9.8% and reach $2.79 billion by 2031, according to a report from Transparency Market Research. That said, it won’t be wrong to conclude that the lease accounting software is here to stay and expand. Thus, if you are working in the leasing market, investing in the lease accounting software will be the best decision you can make at the moment.
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At Decipher Zone, we understand that the needs of each business are unique, therefore, we don’t believe in off-the-shelf solutions. Our team takes time to understand your business goals and challenges which allows them to create successful software that not only aligns with your requirements but also adheres to the ever-changing regulations.
To book a free consultation, get in touch with us today!