Software automation key for compliance

Software automation is the easiest way for lessees and lessors to maintain compliance and meet needs and requirements. 

The three lease accounting software keys are management, compliance and reporting, Blake Mulligan, director of solutions consulting at EzLease, said during the June 17 Accounting Today webinar. 

“Lease management and validation, accounting compliance, and reporting and analytics can all easily be automated with lease accounting software to help simplify your process,” he said. “You need to ensure that your software can handle these three steps.” 

Forty-five percent of organizations used a lease management software solution in 2023, down 2 percentage points year over year, according to the 2023 Global Lease Accounting Survey by LeaseAccelerator and EY. In contrast, forty-two percent of organizations continue to utilize spreadsheets for their lease accounting, up 4 percentage points YoY. 

Accurate, complete accounting 

Lease management software helps ensure a repeatable, accurate process, a key compliance component, Mulligan said. 

“In order to really have sustainable compliance, documented policies and procedures are critical, and software can really help with that process,” he said. “In terms of the process, having a strong, documented process is going to be most important here, and making sure that we have a repeatable process that we can take to ensure accuracy.” 

Sixty-seven percent of attendees said they struggle with accuracy, completeness or both when closing their lease and lessor accounting books, according to a poll taken during the webinar.  

“Where a lot of the challenges exist is data validation, data management, talking about the accuracy and the completeness, and then having the accounting compliance automation aspect,” he said. “How can we make things easier, faster, more efficient, and then, last but not least, the reporting. So let’s make sure, not only are we automating the accounting, not only are we ensuring that it is correct, but let’s have the outputs being automated.” 

Compliance automation outlook

Forty percent of U.S.-based growing and enterprise organizations achieved some level of continuous or automated compliance, according to automation technology firm Drata’s 2023 Compliance Trends report. As a result of organizations’ responses, that number should hit 91% over the next five years as technology investment grows, according to the report. 

While autonomous or continuous compliance adoption experiences growth, human capital also continues to be a necessary part of ensuring compliance and managing the process, Mulligan said. 

“Technology will never fully replace what our people are doing at companies, especially in accounting,” he said. “There are always going to be judgments and gray areas where people will need to step in, and really be that key piece of the process.”