When the discipline now commonly referred to as “Lease Administration” first emerged, it was almost entirely administrative and rarely involved the accounting department. Most often, two separate relationships existed: the one between the landlord and the real estate department’s administrative personnel, who kept the documents, tracked the key dates and provided the interface with the Landlord, and a separate relationship between the Landlord’s bookkeeper and the Tenant’s accounting department. The resulting “disconnect” often led to missed opportunities, duplication of effort, and difficulty in identifying costs, much less controlling or reducing them. In the best-case scenario these departments tolerated each other, but rarely did they collaborate or use the same data/document-set to drive toward common goals.
Today, things are different. While these departments still exist, the lines are not as sharp and the teams are working together more. The thing called “Lease Administration” has become the nucleus of information (some call it the “Central Source of Truth”) that feeds data to both the Real Estate and Accounting Departments. As new users of lease administration data have emerged and the tools needed were built along the way, Accounting Departments have forced positive change; Their new requirements have raised the level of financial data capture, capability/functionality, and reporting. Nearly all of the prevailing, non-proprietary Lease Administration software have greatly expanded the ability to generate financial payment forecasts and sophisticated reporting, such as straight-line entries or departmental cost allocations. Most of them have either completed or are in the final testing phases of modules to help perform testing, track cashflows, and generate the entries required for companies to comply with ASC842 (FASB/IASB Compliance).
2018 should be on the radar of progressive Lease Administration/Accounting teams as we approach the end of the year, but what exactly does that look like? What are the best practices now? What should be happening and what should I be doing? At PSG we have a huge cross-section of client types, real estate holdings being tracked, and industry verticals being represented, but big picture, here is what we’re doing now to help our clients prepare for 2018:
A final push to close out 2016 Operating Expense Reconciliations (yes, believe it or not!)
Fiscal 2018 Portfolio Budget
Year-End Accruals Estimates
Minimum Lease Commitment (aka 10K/Footnote)
Straight-line/Deferred Rent Schedules including
o Asset Retirement Obligations
o Customized Parameters
Remaining Rent Obligation
Help performing or discussing ASC 842/IFRS 16 Schedules and/or Journal Entries
If any of these tasks, reports, or entire areas of discussion remain elusive, just ASKPSG! It costs nothing to speak with one of our owners for some ideas, or to collaborate as we lift the cloud of complexities and issues often surrounding Lease Administration.