How to Speed Up Lease Accounting Close and Mitigate Risks

Streamlining Lease Accounting with Lean Methodologies & Agile Thinking

With the complexity of lease accounting under ASC 842, applying lean methodologies & agile thinking can help lease accountants streamline processes, reduce time to completion, and mitigate risks. By breaking down monthly, quarterly, and annual tasks into smaller, more manageable actions, lease accountants can stay organized, improve accuracy, and ensure compliance. Here’s a checklist incorporating lean and agile practices for optimal efficiency.

Monthly Lease Accounting Checklist

1. Lease Payment Management with Lean Scheduling
   
   
   • Automate Payment Scheduling: Implement automated reminders and recurring payments to minimize manual input and ensure timely payments, reducing the risk of late fees.
   • Kanban for Payment Status Tracking: Use a visual Kanban board to track payment statuses (e.g., pending, paid, reconciled) and quickly identify bottlenecks.
   • Continuous Payment Reconciliation: Schedule daily or weekly payment reconciliations to keep data accurate and reduce month-end workload.


2. Agile Month-End Close Process
   
   
   • Iterative Reviews of Assets and Liabilities: Regularly review right-of-use (ROU) assets and lease liabilities in smaller batches to prevent last-minute corrections.
   • Automate Journal Entries: Use software to automate journal entries for amortization, interest, and lease payments, ensuring accuracy and reducing manual effort.
   • Continuous Lease Modification Updates: Incorporate daily or weekly updates for lease modifications, keeping records accurate and real-time.


3. Lean Financial Reporting and Reconciliation
   
   
   • Automated Financial Reporting: Set up pre-configured, automated reports to generate real-time data for faster financial analysis and reporting.
   • Frequent Reconciliation Sprints: Conduct weekly reconciliation sprints to address discrepancies early, reducing last-minute errors at month-end.
   • Daily Compliance Checks: Perform daily compliance reviews to ensure all records align with ASC 842, keeping audits simple and accurate.


4. Real-Time Data Accuracy with Agile Updates
   
   
   • Centralized Data Hub: Use a centralized data system to ensure lease data, documents, and schedules are consistent and up-to-date across the team.
   • Expiration Alerts: Set up automated alerts for expiring leases, allowing team members to take timely action on renewals or terminations.

Quarterly Lease Accounting Checklist

1. Agile Reassessment and Lease Modifications
   
   
   • Sprint Reviews for Lease Reassessment: Schedule focused sprints to reassess leases and update records quarterly, keeping portfolio data current.
   • Cross-Functional Collaboration: Hold regular meetings with teams like legal and procurement to stay informed on lease modifications and avoid last-minute adjustments.


2. Lean Financial Reporting and Disclosures
   
   
   • Automated Quarterly Reporting: Use automated reporting features to pull accurate data and prepare timely quarterly disclosures.
   • Lean Variance Analysis: Implement a lean process for variance analysis by breaking down complex reports into manageable segments for quick adjustments.


3. Agile Internal Controls
   
   
   • Regular Compliance Mini-Audits: Schedule smaller compliance checks throughout the quarter to catch and address issues early.
   • Scrum-Based Improvement Meetings: Conduct quarterly retrospectives to review processes, identify gaps, and make incremental improvements to internal controls.

Annual Lease Accounting Checklist

1. Lean, Comprehensive Lease Portfolio Review
   
   
   • End-to-End Lease Inventory Sprint: Conduct a dedicated sprint to review the lease portfolio and ensure accurate, up-to-date records.
   • Expiration and Renewal Assessment: Perform a lean analysis of expiring leases, focusing on renewals or terminations that provide the best cost-benefit.


2. Agile Year-End Financial Close
   
   
   • Incremental Journal Entry Review: Review entries throughout the year rather than only at year-end, reducing stress and last-minute work.
   • Automated Disclosure Preparation: Use software to automate year-end disclosure preparation, ensuring accurate reporting for compliance.


3. Policy and Procedure Updates Using Agile Principles
   
   
   • Quarterly Policy Reviews: Schedule policy reviews quarterly rather than annually to stay aligned with any regulatory or business changes, minimizing risk.
   • Agile Team Training: Hold brief, frequent training sessions to keep the team informed about updates and best practices in lease accounting.


4. Lean Process and System Improvements
   
   
   • Annual Software Assessment: Schedule a sprint to evaluate lease management software for functionality and regulatory compliance, identifying any areas for improvement.
   • Process Mapping and Continuous Improvement: Map out lease accounting processes annually to identify inefficiencies and set goals for the upcoming year.

How iLeasePro Supports Lean and Agile Lease Accounting

iLeasePro is a comprehensive lease accounting solution designed to support the tasks and efficiencies outlined in this checklist. Here's how iLeasePro can assist in each area:

1. Lease Payment Management: iLeasePro’s automation features streamline payment scheduling, reduce manual input, and send timely payment reminders, preventing late fees and manual errors.
2. Month-End Close: iLeasePro automates journal entries and amortization schedules, allowing for quicker month-end closings. Its real-time updates for lease modifications ensure accurate records.
3. Financial Reporting and Reconciliation: iLeasePro’s pre-configured, automated reporting generates real-time data, enabling faster financial analysis, variance tracking, and seamless compliance with ASC 842.
4. Data Centralization: iLeasePro serves as a centralized data repository, ensuring all lease information is updated and easily accessible for collaboration and auditing.
5. Lease Reassessment: The platform enables streamlined, accurate lease reassessment and modifications, allowing accountants to handle portfolio updates more efficiently.
6. Compliance and Internal Controls: iLeasePro’s built-in compliance tracking and customizable controls simplify internal audits, reducing the time required for each compliance check.
7. Year-End Financial Close: iLeasePro automates year-end disclosures and pre-configures reporting to meet regulatory standards, helping accountants stay audit-ready.

By using iLeasePro’s features alongside lean and agile practices, lease accountants can enhance operational efficiency, reduce risks, and improve compliance year-round. iLeasePro helps streamline repetitive tasks, enabling accountants to focus on strategic planning and adding value to the organization.

Remember that lease optimization is an ongoing process. Regularly reassess your lease portfolio, monitor market conditions, and adapt your strategy accordingly. By actively managing your lease portfolio, you can improve operational efficiency, reduce costs, and mitigate risks associated with your leased assets.

Explore how iLeasePro can streamline your lease portfolio management!

Tour of iLeasePro

Schedule a Demo

Check Out Knowledge Base

If this guide proved beneficial, please share it with fellow colleagues or bookmark it for future reference. Keep an eye out for more deep dives into the intricate world of lease accounting and corporate taxes and how the ASC 842 Lease Accounting Standard impacts them.