How to Avoid Hidden Costs When Purchasing Lease Administration & Accounting Software
When purchasing Lease Administration & Accounting software, there is more to consider than just the functionality and price. You also want to understand the level of support the vendor will provide.
Software agreements typically range from 3 to 5 years, and, when integrated with an Enterprise resource planning (ERP) system with an even longer lifespan, they can end up being renewed multiple times. Accounting for this, you should choose the best lease accounting software for your business by calculating the total cost of ownership over the expected duration of the software agreement, and not just based on the upfront price.
5 Questions to Ask When Calculating Total Cost of Ownership
When looking to purchase lease software solutions, here are five things to consider:
What is the vendor's successful implementation rate and how often do they come in on-budget and on-time?
Be cautious if you get a quote for implementation that is significantly lower than other providers. Ask about the number of hours included and align on a clear checklist of what the vendor will deliver as part of the implementation. This will ensure that everything you want is included and that there are no surprise additional costs after the contract is signed.
Does the contract include automatic free upgrades?
The advantage of cloud-based software is that you do not have to deal with version control, and all users are in the same instance. You want to understand if there are any additional charges for upgrades after your initial purchase.
3. Maintenance Fees
Will there be any additional maintenance fees?
Another advantage of a cloud-based solution vs. on-premise is that you will not need to perform any maintenance or pay for maintenance costs. You will want to double-check that the vendors you are considering do not charge for maintenance.
4. User Fees
Are you limited with the number of seats?
Organizations often spend weeks or even months trying to identify the appropriate internal stakeholders for a seat or named software license. A policy of unlimited user-ship circumvents this issue and provides secure role-based access to any stakeholder — internal or external — that is a part of your real estate process without additional cost to your balance sheet.
5. Future Needs
Is the software configurable to grow with your business?
Given the length of software agreements, you not only want to consider your company's current needs but also future needs. Ask whether there will be an additional cost to use the accounting solution as your business expands. Can you configure the system, or does it need to be customized by the software provider at an additional cost? Does the lease accounting software allow for international expansion with multi-currency and multi-language?
Considerations When Purchasing a Lease Administration & Accounting Solution
In addition to understanding the total cost of ownership, it is important to do your due diligence and consider the following before making a purchase decision.
Ask for references and talk to your colleagues to get a better understanding of the company and solution you are considering.
- Do the vendors you are considering have a good reputation? What are people saying about them?
- What recognizable brands do they work with?
- How long have they been in business? How many customers do they have?
- How many successful implementations have they completed? Have they had any failed implementations?
- Do they work with both real estate and equipment leases? Can they handle your entire lease portfolio?
- Are they compatible with FASB and IASB lease accounting standards?
Ensure that any accounting software purchased is compliant with FASB and IASB lease accounting standards. This is critical since the accounting standards have changed for both private and public companies, which have made financial reporting and asset management more challenging.
With the deadlines constantly shifting, it is easy to fall behind.
With the new accounting standards, it is crucial to not only confirm that the vendor has a solution that can generate FASB ASC 842 and IFRS 16 compliant reports, but that the lease accounting solution itself is third-party verified. You want to ensure that your accounting team will approve the generated compliance reports.
Being able to access and analyze lease data will provide your business with the insights needed to make timely and accurate decisions. Can you pull reports on all the fields within the leasing software — whether out-of-the-box or user-defined?
Test/Train Environment with Your Production Environment
Check to see if the vendor offers a test/train environment in addition to the production environment in order to test new functionality and perform scenario planning before deploying. You will also want to confirm that there are no additional charges associated with the test environment.
It is important to think about the overall impact the lease administration software will have on your business. How important is it to running your business? What is the cost of making the wrong choice? If you miss deadlines, are there negative consequences?
You do not want to leave your company at risk if timelines slip during implementation or if the product is not continuously invested in.
Making the Lease Administration & Accounting Software Purchase
Purchasing new lease accounting software for your company — particularly one that gets integrated with your business processes — should never be taken lightly. It is essential to take the time to do your homework.
As you have more conversations and continue asking the right questions, the best vendors will become apparent. This should be a long-term relationship, so make sure the vendor is competent and responsive because, after all, a decade is a long-time.
It is critical to stay ahead of the new FASB and IFRS accounting standards. To learn more about Lease Administration & Lease Accounting software, contact us today.