A new lease of Life: Lease management software comes of age (page 1 of 2)

Lessors benefit not only from reduced costs and streamlined business processes, but are also in a far better position to comply with stringent new European and US accounting regulations.

Until now, leasing companies could easily be forgiven for thinking that the ERP revolution of the 1990s and the e-business revolution that followed it had passed them by. Traditional ERP, with its focus on managing the manufacture and sale of goods, was less well suited to businesses based on long-term contracts in which products remain permanently on the books.

While manufacturers were able to implement comprehensive, off-the-shelf systems to manage the whole product lifecycle and everything else besides, lessors had to choose between sticking with paper-based processes, building expensive bespoke systems or buying niche software applications.

The lack of comprehensive business management systems has held lessors back in many ways. Leasing companies who have relied on paper-based processes have been unable to enjoy any of the benefits of the "paperless office" as administration costs have remained high and manual processes laborious. With key data locked away in an array of filing cabinets, managers have been unable to get a good insight into business and market trends.

Companies that built bespoke systems, meanwhile, have been lumbered with the responsibility of managing, maintaining and updating them after the original developers have gone. Any upgrades to the system must be hand-coded, and similarly, any interfaces with other systems, such as General Ledger, customer support and so on, must also be created individually by hand - an expensive and time-consuming process that has resulted in many bespoke lease management systems being left as self-contained "islands" of data and processing, unable to share information with the rest of the enterprise.

Buying lease management software from a specialist vendor has to date been the most common approach. Such systems are designed to automate an array of tasks including lease creation and management, pricing, billing, collections and insurance. Problems have, however, arisen in multinational companies where each country operation has selected its own local software package.

These systems have been unable to interface with each other across borders, meaning that senior management have had very poor insight into global business trends and performance, relying solely on top-level financial reports and anecdotal evidence from country operations, rather than detailed business information from operational leasing systems.

This last problem is now becoming a critical issue because of the imminent introduction of new International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). Listed companies in the European Union must abide by these new standards from January 1st 2005, a major undertaking as the standards require far more extensive and granular accounting detail than has previously been the norm.

A leasing company with operations in multiple EU countries will have to provide local financial reports according to each country's Generally Accepted Accounting Principles, and detailed IAS and IFRS-compliant reports to the market in the country where it has its primary stock exchange listing.

To make matters worse, any European company that has a secondary listing in the US also has to abide by the new American accounting regulations laid down in the Sarbanes-Oxley Act of 2002 in its reports to the US markets.