How to Use Lease Administration Software to Generate Equipment Leasing Cost Savings
At most companies, the leasing processes for IT, fleet, and equipment leases have been neglected with little investment in processes or systems to manage these assets. As a result, many companies have highly inefficient equipment leasing programs that are creating unnecessary costs and performance drags on the organization. The good news is that you may realize seven-figure cost savings in the next 12 to 18 months by implementing best practices for equipment lease administration. Case studies have demonstrated that companies can realize savings of 16-18% of their equipment lease portfolio costs through better sourcing and administration of leases. In this article, we will outline 10 Potential Opportunities for Equipment Leasing Cost Savings.
10 Opportunities for Equipment Leasing Cost Savings
- Lease versus Buy Analysis – Are you consistently performing lease versus buy analyses for new equipment? If not, you may not be making the optimal economic decisions for capital expenditures. Consider standardizing your lease versus buy analyses with a user-friendly tool.
- Competitive Financing – Are you seeking out multiple competitive bids for new equipment leases? Or are you accepting the bundled financing package from the manufacturer’s captive finance arm? If the latter, then you may be leaving significant money on the table. Consider putting your equipment financing opportunities out to bid in a competitive marketplace.
- RFP Management – Are you spending time developing new RFPs for each competitive financing process? Are you manually comparing, analyzing, and ranking lessor proposals? If so, you may be unnecessarily adding weeks onto lease sourcing activities. Consider using equipment lease sourcing software to automate the proposal generation, ranking, and analysis process.
- Contract Negotiation – Are you negotiating different terms and conditions for each new lease with each lessor? If so, you may be running up tens of thousands of dollars in extra legal fees per year. Consider standardizing your master lease agreement contracts with your lessor community.
- Interim Rent – Are you paying interim rent payment on equipment that is delivered before the official start of a lease? If so, you may be significantly increasing the effective interest rates you are paying on financing. Consider arming your procurement managers and category buyers with techniques to minimize interim rent clauses in your equipment leasing contracts.
- Smaller Transactions – Are different business units negotiating lots of smaller ticket leases independent of one another? If so, you may be missing out on the opportunity to leverage your buying power. Consider consolidating smaller transactions into lease lines to reduce administrative and financing costs.
- Evergreen Fees – Are you paying unplanned or unwanted evergreen fees for leases that have past the end of term? If so, you may be missing out on the opportunity to save millions of dollars per year. Consider instituting reporting processes to track equipment coming to end-of-term and assets in evergreen status.
- Buyouts and Renewals – Are you negotiating the best possible terms for equipment buyouts and lease renewals? If not, you may be significantly overpaying for purchases and monthly rent. Consider training your procurement managers and category buyers in specialized techniques for lease buyout and renewal contracts.
- Asset Moves – Are you tracking when equipment changes locations during the term of a lease? If not, you may be paying property taxes incorrectly or violating contract terms with lessors and insurers. Consider instituting a periodic attestation process to verify the existence and location of leased assets.
- Technology Refresh – Are you refreshing IT equipment and other assets with short product life cycles at the end of term? If not, you are missing out on one of the greatest benefits of equipment leasing. Consider instituting automated workflows to notify decision makers of upcoming end-of-term deadlines.
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Learn More about the New Lease Accounting Standards
White Papers, Handbooks, and Research Studies
With the deadlines for the new lease accounting standards approaching quickly, many companies are asking how software can help automate the tasks required for the transition period. US GAAP filers adopting ASC 842 will be required to provide three years of comparative reporting.
Learn the differences between contract-level and asset-level lease accounting in this technical white paper. Review examples of the impact of asset-level decisions, judgments, and events for material handling, data center, and IT equipment.
Considering lease accounting software to comply with the new FASB or IFRS standards? Download this eBook to understand the potential time and cost savings opportunities resulting from automation of lease classification and financial reporting.