Fifteen Places to Look for Your Real Estate and Equipment Leases
Where to Find Your Lease Agreements
It’s National Scavenger Hunt day! And many accounting organizations are in the midst of a scavenger hunt of their own. Not just today, but all year-long accounting teams will be searching through file shares, document repositories and enterprise applications for copies of their leasing contracts. Below is a list of 15 recommendations on where to find your lease agreements.
1) Procurement and Sourcing System
Most companies have financial controls in place requiring a purchase order to be raised for expenses above a certain threshold. As a result, it is likely that leases for buildings, vehicles, computers and other types of assets originated with a purchase order. Contact your procurement (or sourcing) organization to request a report of all open purchase orders resembling a lease. Although, the procurement system may or may not have a copy of the original lease contracts, the PO will contain important data that could help you identify where to find your lease agreements. For example, the PO should identify the lessor name and asset description as well as the business unit and stakeholder who originally requested the lease.
2) Contract Management System
More and more companies are adopting Contract Management Systems that act as repositories for customer and vendor agreements. These Contract Management System automate every stage of the lifecycle from the upfront authoring and negotiation of an agreement to the final expiration and renewal. Chances are good that many of your Master Lease Agreements and schedules are housed in your Contract Management System. Ask the legal team to provide a report of any relevant contracts stored in the system. Don’t just ask for contracts that have the word “lease” in the title. You will need to examine outsourcing and service contracts as well for possible embedded leases.
3) Accounts Payable
Most, if not all, of your leases are being paid based upon an invoice that is submitted at some regular frequency. Some invoices are submitted electronically via EDI, XML or a web portal. Others are submitted as PDF or Word documents via email. But the key data for each invoice ends up in your Accounts Payable database. Request a list of all recurring payments from your electronic invoicing or Accounts Payable application. You can sort through these recurring payments to identify potential leases. Don’t just request last month’s data. Some leases are only invoiced on a quarterly, semi-annual or annual basis. If you process invoices regionally in payment factories or shared service centers, be sure to contact the international locations.
4) Financial Reporting Spreadsheets
Under the current lease accounting standards, capital leases are reported on the balance sheet and operating leases are reported in a notes disclosure. Contact your SEC Reporting or Technical Accounting organization to find out how the data for capital and operating leases is being collected for your quarterly reports today. At most companies details about lease accounting are maintained on spreadsheets, which are rolled up at a business unit or geographic level into a consolidated report that is used as the basis for SEC filings. If you follow these spreadsheets down the chain to their source you will find increasing levels of detail, perhaps even an inventory of leases at a country or business unit level. The spreadsheets probably won’t contain the locations of the specific leasing contracts, but they will contain important clues as to who to ask or where to find your lease agreements.
5) Corporate Treasury and Tax Organizations
At many companies the corporate treasury organization plays a key role in the leasing program. As the owner of the balance sheet and the manager of credit relationships, corporate treasury wants to ensure that the economics of the leasing program are being optimized for the business. Corporate Tax groups may also be involved in leasing programs as most agreements require the lessee to pay property taxes on these assets. Contact your Corporate Treasury and/or Tax organizations to find out if they have any records on what you lease and from who. In most cases the information might be kept in a spreadsheet, but it can provide important clues to helping you pinpoint the actual lease agreements.
6) Lease Administration Team Files
Larger companies and some mid-sized organizations have dedicated lease administration teams. These groups might sit in the corporate real estate department with a scope limited to buildings and land. Alternatively, the lease administration team might be part of a larger shared services function with a broader scope that includes IT, fleet and other equipment leases. The lease administration team is a natural first place to start when searching for your leasing contracts. However, keep in mind that at most companies the lease administration teams are overworked and understaffed. As a result, they may have struggled to maintain a complete repository of leasing contracts. And if there is a repository it is more likely a file share on a network drive, a folder on a content management system or perhaps just a directory on someone’s c: drive.
7) IT Asset Management System
Many companies track all of their technology equipment in an IT Asset Management system. Comprehensive records on the serial numbers, MAC addresses, makes, models, warranties and service contracts for everything from laptops and printers to servers and storage arrays can be found in these Asset Management applications. And most companies track both owned/purchased IT assets as well as leased equipment in these systems. IT Asset Management applications are less likely to store the actual lease contract. But these systems do provide important clues about what is leased, where it is located and who is responsible for the equipment. Ask your IT organization for a list of all desktop hardware, mobile devices, peripherals, networking and data center assets that are associated with leases.
8) IT Outsourcing Providers
Some companies outsource part or all of their corporate IT functions to third parties. Firms such as Accenture, Wipro, TCS can assume day-to-day responsibility for everything from end-user desktops and email systems to ERP applications and data center infrastructure. These outsourced firms may have their own IT Asset Management systems which track assets owned or leased by your company. Alternatively, IT outsourcing companies might have purchased desktops, printers, servers, networking or storage devices that they operate on your behalf. These IT equipment assets might be considered “embedded leases” under the new standards even though they are owned by the outsourcing provider. Ask your IT outsourcing organization for a list of all shared and dedicated assets being used on your account.
9) Fleet Management Systems
Organizations with large fleets of vehicles may have invested in a formal Fleet Management system. Details such as identification numbers, driver assignments and service histories are maintained for each vehicle from delivery trucks to company cars can be found in these applications. Most companies will track both owned/purchased assets as well as leased vehicles in these systems. Fleet Management applications may store copies of the associated Master Lease Agreements. However, even if the contract is not housed in the Fleet Management system, important clues about where to find your lease agreements such as the name of the leasing company and the department operating the vehicle will be. Ask your fleet organization for a list of all vehicles currently under lease.
10) Real Estate Administration Systems
Most large companies and many mid-sized organizations have established centralized corporate real estate teams to manage their properties. And these organizations have invested in specialized real estate systems to track new construction projects, perform space planning and administer leasing contracts. Known as Integrated Workplace Management Systems or Real Estate Administration systems, these applications track the property addresses, base and variable rents, critical dates and contract clauses for leases. Many companies also keep copies of the associated leases in real estate systems as well. Ask your real estate team for a list of all properties currently under lease and the associated agreements.
11) Property Management and Commercial Real Estate Firms
Some companies have elected to outsource the real estate management to a specialized provider that can provide economies of scale and industry best practices to property management. Firms such as JLL, CBRE, Colliers, Newmark Grubb Knight Frank and Cushman & Wakefield each offer a portfolio of management services which include lease administration. The outside firm may be performing functions such as invoice processing, desktop audits and contract renewals. If your company has outsourced some or all of your lease administration to a specialized real estate firm then chances are high that they have accurate, up-to-date records on the properties under lease.
12) Real Estate Building Owners and Landlords
Real estate building owners and landlords are another source for obtaining your property leases. Use the landlord names collected from lease administration, accounts payable, procurement or other systems to identify these lessors. Even if you have copies of your leases, we recommend that you contacting landlords to get their latest documentation. Additional schedules or amendments may have been signed that include updated base and variable rents, renewal clauses and expansion options. Having the latest leasing data will be critical to perform the proper accounting.
13) Equipment Leasing Companies
Equipment leasing companies are a good source for obtaining IT, fleet, material handling and other types of equipment leases. You will likely have a much longer list of equipment lessors than real estate lessors. Commercial banks, vendor captives and independent leasing companies are all players in the equipment financing sector. Contact equipment leasing companies if you can identify the lessor name from asset management, accounts payable, procurement or contract management systems, but cannot locate the original leasing documentation. It may be a good idea to simply request a copy of all your leases from these companies to ensure that you have the correct payment schedules, end of term options and residual values needed to perform the proper accounting.
14) Finance and Accounting BPO
Some companies have elected to outsource part or all of their finance and accounting functions to specialized providers that can offer economies of scale and industry best practices. Firms such as Genpact, Capgemini and Xerox can assume responsibility for order-to-cash, procure-to-pay or record-to-report processes. As a result, these Finance and Accounting BPO firms often oversee or are involved with equipment and real estate leases. If the outside firm is performing functions such as purchase order generation, invoice processing or general accounting then they may have records about what you are leasing. Ask your Finance and Accounting BPO firm for any reports they might be able to produce about the current leasing portfolio.
15) Corporate IT
In addition to contacting the owners of various business applications such as real estate, fleet and accounts payable, you should consider contacting the corporate IT organization as well. Inform the IT group that you are seeking to identify any leases that might be found in enterprise content management systems, networked file shares or end-user desktop files. Most large companies have licensed electronic discovery applications that can scan your corporate network in search of particular types of documents. These applications cannot only identify any files that might appear to be a contract, but they include artificial intelligence capabilities that can scan the document to assess whether it is a lease or not.