Leased equipment might include office equipment (furniture, photocopiers), industrial equipment (forklifts, machinery), transportation equipment (trucks, planes) and IT equipment (laptops, servers). The average Fortune 500 company leases between 1000 and 10,000 pieces of equipment representing between $100M and $1B of leasing obligations.
Over $1 Billion of Equipment is Leased or Financed Each Year in the United States Alone.
Types of Equipment Businesses Lease
Laptops, desktops, servers, storage devices, networking & data center equipment. Copiers, phones, video conference systems.
Commercial cars, trucks and vans. Planes, trains, ocean tankers, railcars and shipping containers.
Tractors, balers, combines, plows, mowers, planters, seeders, sprayers, threshers and irrigation equipment.
Cranes, road rollers, loaders, crawlers, excavators, bulldozer, motor grader, backhoes, and compactors.
Challenges with Equipment Leasing
The Most Poorly Managed Assets in a Company’s Financial Portfolio
Despite the relatively large size and dollar value of these equipment leasing portfolios, most companies have relatively few processes and controls to support their leasing program. No one organization clearly owns leasing within the company. And no one software application stores all of the leasing data. As a result most CFOs don’t know what equipment they are leasing; where it is located; and when the leases expire.
Today, most companies use spreadsheets to track their leases. Unfortunately, spreadsheets are not a scalable or reliable method for tracking thousands of assets in hundreds of locations. As a result, companies don’t realize the savings they expected from their leasing programs. They cannot return equipment on-time. And they pay lots of extra fees around the end of term.
Top Challenges with Equipment Leasing
REDUCING END OF TERM FEES
TRACKING EQUIPMENT THROUGHOUT LEASE
ACCURATE ACCOUNTING & REPORTING
OBTAINING COMPETITIVE FINANCING RATES
New Lease Accounting Changes
A Top 5 Issue for CFOs
The Financial Accounting Standards Board (US GAAP) and International Accounting Standards Board (IFRS) have announced new lease accounting rules which will require companies to provide much more detail about leases in their quarterly and annual filings (think 10-Qs and 10-Ks).
Leases will move from the footnotes of financial reports to being line items on the balance sheet. The deadline for these new lease accounting standards is 2019, but regulators (think SEC) will require up to three years of historical reporting as well (i.e. back to 2017). That means companies need to get started now!
Meeting these new lease accounting guidelines will require CFOs to implement more stringent processes and controls than exist today. And spreadsheets will not be the answer for most companies.
In the News: The Biggest Accounting Change Ever
Some of America’s best-known companies…likely will soon have to effectively boost the debt they report on their balance sheets by tens of billions of dollars. The total possible impact for all companies: as much as $2 trillion.Wall Street Journal - November 10, 2015
Finance Chiefs Get Ready for New Rules - Issues that will be a priority in the coming year include lease accounting, revenue recognition.Wall Street Journal - December 7, 2015
43% of respondents say either that they are not very well informed or that they feel that it’s too early to tell what the impacts of the new accounting standard will be.CFO.com - December 15, 2015
The First App Designed Specifically for Equipment Lease Management
LeaseAccelerator is the industry’s first software application developed specifically for Equipment Lease Management. Fortune 500 companies with large volumes of leased equipment can use LeaseAccelerator to comply with new lease accounting rules while also realizing hard-cost savings of 12-18%.
Sourcing Your New Equipment Leases
Most procurement departments aggressively negotiate the purchasing price for equipment. But they fail to exercise the same rigor when it comes to securing financing for the equipment (leasing terms). Using LeaseAccelerator you can put your leases out to bid in a competitive marketplace and reduce your costs by 6-8%. Those savings adds up quickly for large companies with leasing portfolios in excess of $100M. Learn more »
Administering Your Portfolio of Equipment Leases
Companies choose leasing instead of buying because it saves money and offers the ability to refresh technology faster. But most companies never realize those benefits because they don’t proactively manage their equipment leases. Instead of returning equipment at the end of the lease, companies continue to pay “evergreen fees” well past the end of term. Using LeaseAccelerator you can track all your equipment leases throughout their lifecycle from the initial RFP to the end of term. You can save 10-12% and eliminate costly evergreen fees. Learn more »
Accounting for Your Equipment Leases
Equipment leases are moving from an often-overlooked footnote to a highly visible line on the balance sheet. Most companies have a strong handle on their real estate lease portfolio. But even the most largest and innovative companies lack good data on their equipment leases. LeaseAccelerator enables you track debits and credits at the asset level for all operating and capital leases. It provides you will all the data needed for new lease accounting standards. Learn more »
Learn More about Enterprise Lease Accounting
White Papers, Handbooks and Research Studies
Authored by PwC, this white paper explains the complex world of equipment leasing including the key organizational, process and systems challenges associated with managing assets such as airplanes, medical devices and construction equipment to furniture, laptops and printers.
There are some similarities between real estate and equipment leases. Both have been neglected and under-funded at most organizations. There has been little investment in the people, systems and processes to support real estate and equipment leases.
Learn the 15 Critical Success Factors for Equipment Leasing. Learn how to standardize your lease versus buy analysis; how to competitively source financing; and proactively manage your end of term. By applying these industry best practices you can save millions.