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Copy linkA Stage by Stage Guide to Leasing Equipment for Your Business
Not all leases are created equal, but there is a pattern they will all follow. Once you master the general leasing structure, you’ll have the tools you need to confidently develop and deploy an effective lease management processes.
Every lease is different and will be structured to suit the companies and assets involved. Operational requirements, asset type, accounting regulations, company policy and preferred general practice will all have an impact on the specifics of a lease schedule. However, there is a standard process that all lease agreements follow. In order to arrange the best lease agreements, its is important to know the main priorities for each stage of a lease.
Review and Discussion of Procurement Requirements
The very first stage of the leasing process is deciding what you need from an asset and confirming that leasing is most cost-effective option. Consult with the asset users to determine the operational needs of the assets for the business; how long are the assets needed for? How and where will they be used? Are there any specific usage requirements that need to be met? What is the purchase price of the assets? Do you require an operating lease or a finance lease?
Leasing equipment is a useful option for many companies and can provide a great deal of relief with a business’s cash flow as an alternative method of asset finance. In order to get the best out of a lease, it is important that you have an idea of what it is your business requires before you begin the negotiation process. How can you negotiate a competitive lease deal and include the necessary terms and conditions if you don’t know how the assets will fit into the business?
Important things to consider are:
- Reviewing the need for equipment
- Choosing a suitable asset to suit the requirement
- Confirming the asset funding options i.e. lease, purchase, contract hire etc.
Useful Resources
Questions to ask about your assets
Operating Leases vs. Finance Leases
Negotiation of Lease Terms
Arguably, the most important phase of any asset finance agreement is the lease inception and negotiation. The contract agreed at this stage will determine every aspect of the leases success so it is vital that you take the time to ensure the lease contains everything you need it to.
Picking a lessor can seem a daunting task. There are hundreds of leasing companies and brokers offering a range of financing options, seemingly competitive offers and expertise. There are also many types of lessors, including banks, manufacturers and independent companies all of whom have their own advantages and negatives. Be sure to search and research for the company that is not only trustworthy, but can provide you with the most competitive deal for your internal requirements. Make sure you review every aspect of a lessors offer; the lowest lease rental does not necessarily mean that the lease will be the cheapest if the lease contains strict return conditions.
Do not be afraid to negotiate and challenge terms included in the lease documentation and be sure to consult your trusted lease arrangement specialists. Whether you have leasing experts in-house or you outsource to impartial lease advisors, they will make sure your leases are competitive and include optimal and achievable terms and conditions.
Important things to consider are:
- Research and select an appropriate lessor
- Negotiate key lease clauses
- Confirm, sign and store the documentation
Useful Resources
How to write the best lease
Understanding lease documentation
The Dos and Donts of arranging a lease
During the Lease Period
Once a lease has been agreed and you’ve received the assets, there is little action required until the final stage of the lease. However, this does not mean that the lease should be filed away and forgotten. It is easy to become complacent during this phase, but it is important that you keep track of your leased assets so you can secure a smooth end of lease transition.
Running regular reports on aspects such as asset location, equipment condition, maintenance checks and payment records will help to avoid problems when it comes time to return the equipment such as missing assets or charges for damages.
Using lease portfolio management software will allow to keep track of your leases. You can automate and run numerous reports, ranging from custom internal updates of payment schedules and asset usage right through to statuary and financial reports that comply with lease accounting requirements.
Important things to consider are:
- Maintain contractual obligations such as regular maintenance checks or equipment condition
- Track and pay installments on time
- Regularly report on and assess both the assets and lease
Useful Resources
Mastering effective lease management
5 Questions finance directors should be able to answer about leases
Excel is no longer enough for your lease management
End of Lease Review and Confirmation
When it comes to the final stage of the lease, it is important to act in advance. Usually, your lease will come with a notice period, which contains details of how long before the end of the lease date that you’ll need to notify and arrange your end of lease options with your lessor.
Without a lease management process in place, even industry leading companies end up missing notice dates and allowing the lease to extend. Forgetting to notify your lessor can lead to additional, unnecessary costs and penalties, which can be very difficult to cancel and correct. Our lease management software will alert you in advance to when a lease is approaching it notice date, giving you plenty of time to make a decision on how to end the lease and negotiate with your lessor.
If you chose to terminate the lease and return the equipment, it is important that you consult the lease schedule to avoid additional penalty charges. This may be the final profit opportunity for the lessor so it is vital that you follow the return conditions and are covered by your contract to ensure a hassle free end of lease process.
Important things to consider are:
- Reassess the operational and financial requirements for the asset
- Discuss the desired end of lease action i.e. termination or confirming a secondary term
- Notify the lessor within the notice period
- Continue with the next steps, adhering to the lease schedule
Useful Resources
How to control the end of lease process
Potential problems at the end of a lease
By understanding the standard timeline of a lease, you can develop internal procedures to ensure that you get the very best out of each stage of your leases.
It is important to remember that each lease will vary depending on multiple factors and, as such, the decisions and actions required at each stage of the process may change considerably. However, generally, the priorities will be the same as those listed above.
Innervision’s lease management software, LOIS, is specifically designed to provide solutions and simplicity to each stage of the leasing process. From arranging and analysing new lease quotations at lease inception, through running regular custom and standard reports on assets and leases and finishing with end of lease alerts and confirmation of next options; your entire lease management can be organised through one easy to use system.
For more information on the stages of a lease and how to get the best out of each one, be sure to get in touch with out leasing experts. Alternatively, you can download our guide to leasing, here.
To learn more about how lease management software can help you track, manage and optimise your leases at every stage of the process, download our guide here.
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