
Common Area Maintenance (CAM) Charges Explained
Discover the benefits and features of a proper real estate lease administration solution.
Leasing has long been a proven strategy for optimizing cash flow, which becomes more important when managing through a recession. To get the full return-on-investment (ROI) of leasing, many organizations are looking for ways to optimize the entire leasing process from start to finish. In this article, we cover a few of the key strategies you can use to achieve your cash flow goals during any downturn.
The overall process often looks something like this. First, many organizations are centralizing Lease vs. Buy decisions to control decision making so that everyone in the organization is using the same policies and criteria for every lease. Once the decision is made to lease, they’re using competitive bidding to get the best deal on lease financing. With integrated accounting, lease data is ready for close and audit processes. This ensures that the leasing process remains compliant with the governmental standards such as ASC 842 and IFRS 16. Finally, automating end-of-term management helps manage lease returns so it’s more likely you’ll achieve your expected ROI.
There are several stakeholders in your organization who benefit from lease lifecycle management:
Let’s look at an example. A multinational manufacturing company wanted to improve their leasing program to improve cash flow during a recession. Its regional centers needed to improve cost, quality, and compliance in the upcoming period. Their leasing was fragmented, disjointed, and a semimanual process with lots of leased assets in lots of different countries. Many upstream, local stakeholders were transacting with insufficient financial expertise. No one was accountable for the economic performance of the leases. There were minimal up-front controls over the lease management process. This resulted in downstream problems with data quality, transparency to customers, overpayment and accounting/financial reporting inefficiencies.
When this company shifted to the new on-balance sheet compliance standards, leasing became a catalyst for digital finance transformation. Using automation to deliver end-to-end process improvements and cost savings, the company established one global lease lifecycle process and operating model. Having stronger controls led to having better data which made it easier to defend assertions.
The company now had access to a global lessor network, automated end-of-term notifications, and defined reconciliation processes to ensure an organized tracking of leases. The company was able to protect cash and free up cash flow. Their operations moved much faster and easier without any overpayments. This company saved an estimated $4.5 million due to the automation of their leasing program.
While a recession could happen any time, it’s an opportunity to evaluate ways to optimize existing processes. With the help of lease lifecycle management, you can make better leasing decisions and avoid overpaying on leases. Evergreen leases will be reduced, meaning your company will improve its free cash flow and realize the savings you were planning up front. With the help of lease automation and centralization, you can improve overall cash flow for the company in any economic environment.
To find out how to implement lease lifecycle automation in your organization, schedule a demo with our team today.
Discover the benefits and features of a proper real estate lease administration solution.
A guide on how to account for TIA under ASC 842.
Discover the benefits and features of a proper real estate lease administration solution.
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