During many organizations’ initial implementation of the lease accounting standards, a software was selected to assist in crossing the finish line to compliance. If the selection of lease accounting software was frantic or last minute, you may not have had the opportunity to employ a checklist of specifications or expectations.
However, once organizations became more familiar with their software – coupled with significant improvements to the application offerings, many organizations have come to realize their software could be doing more. If you’ve seen any of the signs it’s time to break up with your lease accounting software, read on to learn the steps to switch from your current vendor to a new one.
Understand your current processes
Before jumping into a new software, it’s important to understand your current processes. Identify the specific users across different departments using your current software, and discuss their experience with the software to gain an understanding of the following:
- What features are used to do the job?
- What processes does the software assist with or is involved with that you don’t want to disrupt?
- Are there any features or functionalities the software lacks?
- What are the “nice to have” features vs. the “must have” features?
Once you’ve identified how the system is currently being used and the user requirements, you can ensure that at minimum, you will find software that meets these needs.
Additionally, understand the terms of your current contract. Establish an internal timeline for when you would like to have the new software implemented. If you weren’t involved in the contracting process, reach out to legal or procurement to find out when your current agreement ends before establishing your timeline. We recommend planning to purchase software before your existing contract expires so the solutions potentially have a few months of overlap for a smoother transition. This will allow you to migrate the data efficiently without worrying about losing access.
Vendor evaluation
The market for lease accounting software has more options than it previously did when organizations did their initial evaluation. Originally, the options were limited and time was of the essence with the compliance deadline looming. As a result, companies may not have taken the time to pick the best option, but instead chose the one that was the cheapest, the quickest, or the first one they found. Don’t make the same mistake twice. Now is the time to research the current lease accounting software market to find the software that best meets your organization’s functional needs and financial requirements.
After discussing the feature “must haves” with your current users and identifying potential problems with the current product you would like to solve, LeaseQuery recommends putting together a checklist of all your considered features. Categorize the features into “Must Have”, “Nice to Have”, and perhaps a category of those you “Don’t Have Today” to easily identify the software providers who can meet your minimum requirements and not waste time evaluating those who can not. Not sure what else your software should be doing? Download our LeaseQuery Competitive Advantage List or RFP template for ideas.
In addition to considerations like functionality and price, also consider what level of support your organization needs. Which types of support do your users primarily prefer? Some people prefer email ticketing and self-service support options, while others prefer to talk to a live agent. As part of your software evaluation, speak with not only your current software users but also your peers and auditors to understand their experiences with software in the market and whether they have any recommendations or solutions to avoid.
Check sites like G2 or Capterra for additional recommendations. Read through real reviews and testimonials to see what other users say about the vendors you are considering.
Once you’ve established a shortlist of vendors, reach out and set up demos of the solutions you think meet the criteria of your organization’s requirements. Ask lots of questions and address any concerns you have. In addition to the feature checklist you put together, check out our software comparison guide for examples of other questions for prospective vendors.
Data consolidation and migration
Once you have established the vendor of choice, prepare your data for migration. If possible, extract all existing data into an Excel spreadsheet and scrub the data to make sure everything is included. This would be a great time to review your portfolio for any bad data or errors and clean up what you can.
Reach out to your vendor of choice about any data requirements for migration, and verify you have the required data points within your existing data. In addition to new leases or lease changes throughout the current year, consider whether you need to include data for expired or terminated leases for comparative financial reporting.
Once the lease data is consolidated into a comprehensive list, run the disclosure reports, account balances, and other standard reports out of the software system. Export these and reconcile your lease listing to your disclosure reports, to ensure the lease listing supports the disclosure reports and vice versa.
If copies of lease agreements are stored in the existing software, export and save them as well as any additional supporting data or external work performed in Excel. In addition to the lease data, be prepared to provide your new vendor with your organization’s specific configurations and specifications, including:
- Primary user information
- GL accounts/account numbers
- Your organization’s internal structure (i.e. regions, company codes, cost centers, departments, etc.)
- Lease accounting policy elections
Speaking of policies, now is a good time to reevaluate your internal controls and lease accounting policies to see if any need to be updated. Additionally, consider if the new lease accounting solution will result in changes to current processes. Are there new users or departments who could benefit from the new solution’s functionalities?
Once you have extracted and consolidated your lease data from your current system, the migration process to the new software will depend on the options the vendor provides, the volume of leases, and state of the data you have.
Testing and reconciliation
Once the prior software’s lease data has been extracted and migrated to your new software, it’s time to test and review the results. Reconcile the lease listing from the new software to the list you consolidated prior to data migration. Test a sample of data points to ensure completion and accuracy within the new system. In addition to testing out the raw data, review a few of the new software’s amortization schedules to compare to results from your previous software. Be prepared to explain any differences between the methodologies of each software and get comfortable with the reports, amortization schedules, and journal entry calculations from the new software in case your auditors have any questions.
Compare the new software’s account balances and report outputs to those of your general ledger balances to check for any differences. As all software does things a little bit differently, variances will likely occur. Prepare to reconcile the differences and record any necessary one-time adjusting entries once the new software is implemented.
Finally, don’t skip sufficient training. Again, all software works a bit differently, so there will be a period of adjustment for your users to get up to speed on the new software. Ensure all users know the proper support channels and are aware of any changes in functionality, processes, or procedures impacting their day-to-day.
Summary
If the functionality of your current lease accounting software just isn’t cutting it, consider switching to a new software that better meets your organization’s needs. Following the steps above will make for a seamless transition to a more efficient and valuable software. Schedule a free demo with LeaseQuery to see what an alternative software can do for you!
