Top 4 challenges of Excel-based lease accounting

Including Microsoft Excel in your lease accounting workflow may seem like the simplest or most practical way to manage simple accounting tasks. And it would be – if the business landscape never changed.

While Excel can be a great starting point, it can’t keep up with the real estate market – especially for retailers. As your business adapts to new market conditions and management processes get more complex, the risk of broken formulas, incorrect data, and lost files increases.

Leasing commercial space is a cornerstone of the retail business model. Lease terms directly affect your balance sheet, cash flow, and profitability. Accurate lease accounting helps retailers effectively manage their lease portfolios, track lease expenses, and comply with regulatory standards such as ASC 842 and IFRS 16. Without accurate lease accounting, it’s hard to stay nimble in an always-evolving retail environment.

Excel may seem like a convenient tool for handling lease data, but it can expose you to significant risks. Here are the top four challenges to using Excel for lease accounting.

1. Error-prone manual processes

Excel-based lease accounting relies heavily on manual data entry and calculations. Human error is inevitable, which means a greater risk of incorrectly entered or missing information – and that leads to inaccuracies in your lease calculations, depreciation schedules, and financial reporting. Even a small mistake in a lease term or payment amount can have cascading effects on your financial reports, potentially leading to compliance issues and .

2. Limited scalability and efficiency

As your lease portfolio grows, managing lease data in Excel becomes increasingly cumbersome and inefficient. Excel to handle large volumes of leases, leaving you stuck with slower processing times and increased risk of errors. Moreover, it’s time-consuming to continually update and maintain multiple Excel spreadsheets. Doing so hinders your productivity and diverts resources from the strategic activities that grow your business.

3. Compliance risks

Lease accounting standards, such as ASC 842 and IFRS 16, outline stringent reporting requirements to ensure transparency and consistency in financial statements. Excel-based systems lack required to verify compliance with these standards. When you can’t properly track and document lease data changes, your businesses risks failing audits, incurring penalties, and damaging your reputation with stakeholders.

4. Limited reporting and analysis capabilities

Excel’s reporting and analysis capabilities are limited compared to dedicated lease accounting software solutions. Analyzing lease data in Excel often requires developing complex formulas and manually manipulating data, making it difficult to gain meaningful, timely insights when you need them. Excel with other financial systems, limiting your visibility into the broader financial impact of leases on your business.

While it offers basic functionality for financial tasks, using Excel for lease accounting introduces significant risks for retailers. Investing in dedicated lease accounting software solutions is crucial, giving you the automation, scalability, compliance features, and robust reporting capabilities your business needs to succeed. By embracing open and connected technology, retailers can streamline lease management processes, reduce errors, ensure compliance, and make better informed financial decisions.

These aren’t the only advantages of an automated lease accounting solution. Contact MRI Software today to learn what open and connected technology can do for your retail business.

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