But lease abstraction isn’t simple. It takes a variety of skills that can take years to acquire, not to mention years of experience. Which is why companies that need one or more lease abstract typically hire a lease abstraction service.
What follows is a breakdown of what’s involved. We’ll go over the basics when it comes to lease abstracts and lease abstraction services, and we’ll also tell you who can use them and what benefits they provide.
When we’re done you’ll see why you need to consider a lease abstraction service to get the most out of your leases as both assets and business tools.
What is a Lease Abstract?
To understand what a lease abstraction service does, you have to know what a lease abstract is and why you need one.
Lease abstracts condense and simplify the most important and frequently used information in a commercial lease.
They’re simple and easy to understand, but the information they contain is invaluable. It captures key concepts and puts the essential information up front where you need it most.
Lease Abstraction and the Lease Abstraction Process
The lease abstraction process starts with analyzing the lease. While the overall process is complex, it can be broken down and simplified into two basic steps:
- Identify all of the cash flow transactions that are associated with lease payments.
- Calculate the current net value of the lease by using a discount rate and a spreadsheet program or financial calculation program like Excel.
Who Does Lease Abstraction and What Lease Skills Are Involved?
While there are software products from companies like iLeasePro that simplify the abstraction process, the expertise provided by lease abstraction services is impressive and comprehensive.
Here’s a summary list of what’s involved:
- Financial analysis
- Information analysis
- Coding skills
- Training in GAAP (Generally Accepted Accounting Principles)
- Legal training to understand legal principles and the language used in legal documentation
- Understanding and experience with commercial leases
What Lease Abstraction Services Provide
While least abstraction services tend to design their presentation to individual clients, here’s a general list of what they provide:
- An initial analysis of all lease-related documents
- Document updates that include current data that is in compliance with all relevant standards.
- Report generation that meets the needs of the requesting company.
- A quality assurance review of all lease abstracts.
- Custom templates for gathering all data not contained in the lease that many be necessary to perform the abstract.
- A consistent format for information across the lease portfolio based on established best practices for lease accounting and administration
The Advantages Provided By a Lease Abstraction Service
Now let’s talk more about the specific benefits of using a lease abstraction service. They’re extensive and comprehensive, so we’ll start with this partial list.
- Efficient utilization of resources. For some companies, allocating resources to perform lease abstraction takes valued employees away from other essential tasks. A lease abstraction service allows a third party with a fresh perspective to analyze your leases, and you get an accurate, concise abstract that can be used right away to make better business decisions with your leasing portfolio.
- More accurate data. It’s easy to make mistakes if you’re not experienced when it comes to lease abstraction, and those mistakes can be very damaging, especially if they involve financial, technical or personal data. Lease abstraction services eliminate this possibility. Some of these companies use sophisticated software that implements AI and machine learning to make sure these kinds of errors don’t occur. Accurate data saves you from increased expenses down the line.
- Cost effective. While the outlay to use a lease abstraction service can be considerable, the cost actually balances out when you consider what these services provide. Here are some of the cost advantages to hiring such a service.
- No training required for existing personnel or hire contractors to do lease abstraction for you.
- Increased accuracy reduces costs. No more errors that lead to delays in payments or financial mistakes.
- You get lease abstracts faster, which decreases operating costs.
- Quick turnaround time. Lease abstraction services tend to have experience with a variety of different types of leases, so they can produce abstracts faster and more accurately. Manual processes are eliminated, so you get data and results in days, not weeks.
- Better property portfolio management. Managing leases is a complex task for property management companies. Different leases may have different terminology and conditions, which makes it more difficult to abstract them.
Lease abstraction services have experience meeting the needs of all kinds of firms, from property management companies to construction companies doing a lot of equipment leases. They’re familiar with the different types of leases and the terminology involved, and as such they can abstract them faster and more easily.
- Security and data confidentiality. Leases contain a variety of personal, financial and technical data that can be very damaging if it gets into the wrong hands.
Airtight security is essential, and lease abstraction services actually offer confidentiality guarantees to prevent data leaks.
- Better compliance with existing accounting standards. Helps keep leases in compliance with ASC 842, GAAP, FASB, IASB and so on. Mistakes are eliminated, and data collection and reports are generated according to established best practices that you set up to meet your needs.
iLeasePro Works as a Team to Service Your Lease Abstraction Service Client Needs
At iLeasePro, we understand every aspect of lease abstraction. We’ve done it with thousands of different kinds of leases, so we know how to produce concise, accurate abstracts that meet your needs.
To find out more and set up a free consult, call us at 888-351-4606 or email us at info@iLeasePro.com.
We also have plenty of great information about lease abstracts and lease abstraction services on our website, which ileasepro.com, and you can chat with a live representative there as well.