Issue link: https://resources.tangoanalytics.com/i/1465903
STRATEGY POLICY INVENTORY DATA SYSTEM PROCESS CONTROL SUSTAIN 26 tangoanalytics.com ROAD TO LEASE COMPLIANCE | PROCESS smaller companies often lack a procurement group and rely on decentralized or department level procurement of products and services. Additionally, many large organizations with well-established procurement groups do not engage procurement for real estate leases, design and construction services or the procurement of furniture, fixtures and equipment (FF&E). All of this should change as companies begin to comply with the new lease accounting standards. A standardized procurement process is the perfect place to utilize new lease identification and classification tests to ensure leases are not slipping through the cracks. It also presents an opportunity to deploy deeper lease vs. buy analysis and other lease optimization tactics. Again, many companies will face headwinds trying to insert standardized procurement processes into the real estate deal making process. Accounts Payable & Accounts Receivable Processes We've acknowledged several times that real estate leases tend to be managed centrally by a lease administration group and a purpose-built lease software system and database. The same cannot be said for equipment and embedded leases that often live at the department level in Excel spreadsheets and file cabinets. The call to action of the new lease accounting standard is clear – all leases should be managed in a centralized, purpose-built software solution. Moving to a single system to manage all leases will necessarily impact both the accounts payable and accounts receivable functions for all lessees. Specifically, equipment leases, and to a degree embedded leases, will move to a process like that of real estate leases, where the software calculates payment obligations and communicates fixed and variable payments for a particular period to a company's financial system for payment (i.e. accounts payable) via integration. Today, equipment leases are not typically managed in a system and accounts payable simply pays monthly invoices as received. Moving forward, the lease administration and accounting system will take over ownership of payment calculation and approval, while accounts payable will merely cut checks. PROCESS