When we mention lease accounting software, the immediate association is with financial reporting. Given the complexities and ever-evolving standards like IFRS 16 and ASC 842, it’s no wonder that the financial reporting team hails such systems as game-changers. But what about our Financial Planning and Analysis (FP&A) colleagues? Can they too, reap benefits from this sophisticated piece of software?
Here are some compelling ways the FP&A team can leverage a modern lease accounting system:
- Enhanced Forecasting: Lease accounting systems, with their intricate details of lease durations, costs, and other variables, can assist FP&A in creating more accurate and sophisticated cash flow forecasts. This can be invaluable for planning capital expenditures and gauging liquidity needs.
- Scenario Analysis: Modern lease accounting systems can model various lease scenarios, enabling FP&A teams to assess potential new leases’ impact on the company’s finances. This assists in decision-making and ensures alignment with the company’s financial goals.
- Budgeting & Variance Analysis: FP&A teams can utilize these systems for comparing the budgeted lease costs versus the actuals. Immediate access to lease-related expenses will simplify the variance analysis process, helping the team pinpoint areas of concern swiftly.
- Operational Insights: Lease accounting software often includes granular data about the assets, their usage, and associated costs. FP&A teams can extract insights into how assets are utilized across the organization, helping guide decisions about future investments or operational efficiencies.
- Collaboration and Integration: Modern software solutions often offer integration capabilities with other financial systems. This seamless integration can provide FP&A teams with a comprehensive financial picture, making analysis more holistic and data-driven.
- Mitigating Risks: With a clear view of all leases and associated liabilities, the FP&A team can be more proactive in identifying and managing financial risks. Whether it’s recognizing unfavourable lease terms or highlighting areas where renegotiation could be beneficial, the system serves as a foundational tool for strategic planning.
In conclusion, while lease accounting software might seem niche and tailored primarily for financial reporting. And compliance to ASC 842 and IFRS 16, its capacities and data-rich environment provide a goldmine of information for FP&A teams. By incorporating these systems into their processes, FP&A can amplify their role in strategic decision-making and be better equipped to drive their organization’s financial health forward.
So, the next time you consider an upgrade or investment in such lease accounting software, remember it’s not just for the reporting team; it’s a tool to empower the entire finance function.