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The 5 Most Common Mistakes Almost Every Company Makes

As we’ve worked with our clients to complete implementation of the new FASB ACS 842 requirements, we’ve come across five common mistakes almost every company makes.

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As we’ve worked with our clients to complete implementation of the new FASB ACS 842 requirements, we’ve come across five common mistakes almost every company makes.

As we’ve worked with our clients to complete implementation of the new FASB ACS 842 requirements, we’ve come across five common mistakes almost every company makes.

1) Underestimating the scope

The new FASB standard will require organizational changes that touch upon real estate, leasing operations, accounting, IT, and financial reporting—and most businesses have underestimated the effort it will take for implementation. Current systems, or even the simple use of Excel, will likely be unable to handle the complexity, especially if you have multiple leases. New technology will have to be integrated. It will require a fresh look at all current lease data, and review of documents that might include imbedded leases. New reporting will need to be built. Equipment data will need to be sourced, analyzed and integrated. Outside resources will be necessary, most likely from your accounting and audit team and technology solutions provider. You should plan on needing a couple of months to test and troubleshoot.

2) Data normalization, data hygiene and data refresh

Another common mistake is thinking current data is sufficient and, therefore, not building processes to perform ongoing data hygiene. Current lease data that is pulled from spreadsheets and current systems, as well as those leases stored in file cabinets, must be abstracted. The new standard will require data elements you’re not likely to have today. Once you abstract the data, you’ll need to normalize it in your new system. And as lease terms update, data must be refreshed on a regular basis.

3) Current systems and tracking may not suffice

Depending on the number of leases and their complexity, the new standards may require you to move data from your current systems (Excel, lease software) to a new system that can handle the new lease standard requirements. If you are a company that already owns lease software to track leases and payments, this system may not have all the necessary information to calculate the journal entries for implementation and ongoing changes.

4) Product vs. vendor-based selection criteria

The four key areas to evaluate in a solutions provider are features, price, services, and the ability for the software to be user-friendly. First, the features must meet your spec requirements. Second, the solution must be within your budget. But, the biggest selection criteria will concern services and the ability for your users to use the software with ease. It’s not only a features and price discussion. Choose a vendor—not a product. Major areas to understand up front are field customization; ad hoc reporting; abstraction process and timeframe; and support availability. And be clear on how you’ll be supported after the sale.

5) Solving for today’s problem vs. the future

Today’s problem, the one immediately in front of you, is compliance with the new FASB 842 standard. Most likely you’ll be pressed to meet the deadline. But you shouldn’t let that prevent you from thinking about the future. What if you used this opportunity to transform your real estate, accounting and finance processes? Companies often spend their time scrambling to comply with the new standards instead of thinking about how they can use this occasion to upgrade their entire data storage and reporting systems. Be sure to spend some time with your team considering all the possibilities.

In the next article in our Leasing series, we will discuss the best practices for deployment.

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