How to Solve Capital Lease Reconciliation Challenges
It seems like a straightforward question, but it can be very tough for companies with multiple capital leases to manage these amounts correctly. Invoices are often spread out over years, with the original lease contract filed safely away in a folder somewhere, making reconciliation problematic.
You may be overpaying for your capital lease without realizing it, especially if several contracts are involved. It’s time to overcome lease reconciliation challenges and make sure you only pay what you actually owe.
Here are two challenges of the capital lease reconciliation process that are easy to resolve:
1. “There is no easy way to match our invoices to the original lease agreement”
Problem: Even simple equipment leases can be extremely difficult to reconcile. It is all too easy to lose track of the lease duration, the amount already paid and the remaining amount owed.
This is a common problem, particularly for retailers who lease their premises with a Common-Area Maintenance (CAM) lease. The cost of your CAM lease varies based on your company’s physical expansion over time, the definition of your base-year, square footage and variance cap, among other factors. Accurately reconciling these differences against your original contract and your actual payments seems almost impossible.
Solution: Companies can avoid these reconciliation problems by deploying digital archiving software to computerize contracts and invoices. With a digital archive, financial controllers can easily track all payments and contract terms.
2. “It’s difficult to track finance leases through Excel spreadsheets”
Problem: Spreadsheets are often seen as a panacea for financial tasks, but they leave room for small mistakes that greatly impact the financial close. With increased pressure from management to close the books faster, the growing complexity of the close process heralds even more potential for spreadsheet errors.
Solution: Stop using spreadsheets to record your transactions and complete your reconciliation. Besides their cumbersome nature, spreadsheets render it impossible to track changes, causing all kinds of governance, risk and compliance (GRC) issues. While eliminating the use of spreadsheets may be difficult if you’re used to using it as part of your process, automated reconciliation software maximizes productivity while minimizing risk.Spreadsheets are too simple to be the answer for everything. With automation, problems like these are easily-solved. Digital archives help with tracking and storing documents, and recording the future liability leases pose. No more flicking through years of paper documents in individual binders.
To learn more about how automation can impact your capital lease reconciliation process, visit our solutions.
Written by: Ashton Mathai