The wider business-benefits of meeting lease obligations
As a new financial year begins, I have no doubt that many businesses have set goals to improve their operations and performance in 2021/22. Something about each new financial year ignites our best intentions and a renewed sense of determination to do things better.
So, with this annual thrust of enthusiasm, where should you focus? I recommend starting with getting the basics right – and when managing property this should mean knowing all of your lease obligations.
Mismanagement of data putting leases at risk
Managing a large or growing property portfolio is not simple, however in my experience, the problems often stem from not having the information basics right. A failure to master the management of data can lead to more significant problems down the track.
Let’s use corporate lease obligations as an example. When a business has multiple leases – dozens, or hundreds – the key details of each one can easily become lost in the confusion, when not monitored and managed correctly. Almost certainly they won’t all be the same – the obligations will differ, costs will be different, dates and timeframes will vary, and the business impacts significant or maybe just minor.
It’s these three main points that are the biggest problems when businesses don’t properly manage their lease data.
Dates, dollars and demands represent the fundamentals of your leases. Without proper management of this key information, businesses often find themselves facing problems that can majorly affect their profitability and operations:
- Missing Option Notice Dates or Critical Expiry Dates
- Failing to adequately budget for obligations such as Make Goods, Rent Increases or Incentives
- Loss of tenure or financial penalty for breaching the lease
- Payment errors
I once saw a tenant, a major International conglomerate occupying a stand-alone building, have to pay a back-dated rental invoice for over $40,000. What happened? Well, for nearly ten years their small regional landlord had been diligently invoicing them the wrong rent every month. As each of the amounts weren’t significant and there was no data alignment between the property and finance teams it was never identified, until the landlord actually sadly passed, and the diligent estate lawyer undertook a rental audit, finding the systemic errors and then legally recovering the difference over the entire lease term, before then having the building sold for an even higher price.
And don’t be fooled, it also happens with major landlords – we once saw a client recover in excess of $150,000 over a six-month period in historical lease overpayments, due mainly to incorrect CPIs and missed occupancy rebates.
These problems that arise are a direct result of inadequate systems leading to operational mismanagement and data failure. These can certainly make meeting business and financial goals even more difficult – especially when landlords are more than likely to be operating with greater systems.
Invest correctly for business certainty
Poor monitoring of lease data usually isn’t as a result of a lack of knowledge or effort. It’s almost always due to a lack of investment in systems and resources.
Without the right tools and people, the management of data becomes a far more difficult, time-consuming and high-risk task – one which is often put into the ‘too hard basket’. While starting as just a cyclical problem it then becomes more and more significant as your portfolio grows.
In order to avoid the issues of mismanaging leases, you need to be in control of your lease details for every location – Anywhere, Anytime.
For any property lease, you should be able to see all critical dates, such as expiry options, all financial expenses due monthly, annually or on-demand plus any special conditions, rebates, break clauses or obligations, immediately. This level of visibility will allow you to:
Budget Accurately – Meeting lease obligations often includes a mid-term refurbishment or meeting a make-good of the premise to its original condition termination. Lease renewals or options may also come with rental increases or additional charges. Being aware of exact costs well ahead of time is necessary in order to budget accurately and avoiding surprises for the CFO.
Plan Correctly – Be prepared and use this knowledge to not only ensure you don’t miss options, an expiry or a lease demand, but to plan for upcoming dates, ensuring that operationally you’re planning correctly.
Report Consistently – Data-driven reporting and analysis is the latest buzz in business however misreporting and misinformation is the risk when you’re relying on data that is not trustworthy and/or being managed incorrectly.
Gain short and long-term benefits with greater visibility and control over your leases
Too often I see businesses relying on spreadsheets to manage their critical lease data. While seen as cheap and simple, these are not attributes that anybody would generally want to associate with managing such significant expenses, nor some of the more complex contractual obligations.
Spreadsheets do not provide a sufficient control point for this critical business information, while also limiting the visibility of this information and ultimately compromising its security and reliability.
As a purpose-built application MRI LeaseEagle lease management software provides more concentrated capabilities than even some of the largest ERPs, without virtually no implementation cost.
Designed especially for tenants and occupiers, MRI LeaseEagle is built around the two key needs of information management: Visibility and control – critical for leases. In order to fully utilise your data to get the most from it and to meet all of your obligations, it is essential to have:
- A single source of truth that everyone can trust in
- Appropriate User Controls for the management and distribution of critical information
- Automations, alerts and reminders of key contract and operational dates and obligations
- Detailed business reporting tools for superior insight and analysis at any time
When it comes to lease management, it is vital that you never have to question your data. By creating a single access point for all critical data, MRI LeaseEagle ensures your data is accurate and secure, while also providing the tools you need to generate customised reports for data-driven business insights and decision support.
If you’re wanting to get ahead in the 2021/22 FY, ensuring the management of your lease portfolio is right is a great place to start. As a project, it is valuable and achievable – a great win for your business.
If you would like to discuss how easy it can be to improve your lease management, please click here to contact MRI LeaseEagle.
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