Making informed decisions when managing a lease portfolio is a tricky business. Already one of the more complicated areas of finance and asset management, it is undergoing regulatory change and this explains why a significant number of companies are finding IFRS 16 harder than they imagined.
Rather than seeing IFRS 16 as a threat or something to be feared, however, you can take the chance to become a lease management expert within your business by following these lease management tips. Here’s what to do.
- Secure End Of Lease Improvements Such As:
Share The Physical Improvement Burden (make it current)
- Increase Portfolio Visibility With Technology For:
- Easy Notifications
- Centralise Your Lease Management
- To Be More Efficient
- And Avoid Duplicated Work
- Negotiate Better Leases With:
- More Favourable Clauses
- Improved Cash Flow
When the time approaches for whatever the asset in question is to be handed back to the provider, be it anything from IT equipment to office space, the underlying owner would likely rather want to keep accruing rental income. Assets on their books need marketing and moving on. Bearing this in mind means you can easily remove this headache and that allows you to agree on new terms.
Sell your loyalty and simplicity and be rewarded with more favourable terms. Assuming, of course, that the asset still functions to a suitable standard.
Share The Physical Improvement Burden
If the asset needs a little attention to improve its usability, work with the lessor to upgrade or refresh it. Whether it’s altering the floorplan of an office building or investing in a systematic overhaul of the inner workings of a piece of manufacturing equipment, you will be able to turn this into an advantage for your business.
The principle is thus: you know your provider will need to undertake this work in order to make the asset more marketable at the end of your lease and you’ll be looking for a comparative or better level of the asset at the same time. Working together will help both parties.
The end result is a more effective asset than the one you currently possess with an improved relationship and agreement in place once the work is complete.
Incorporating smart technologies can take a lot of the hard work out of your lease management. Lease management systems such as our own LOIS and tools like Portfolio Visualizer can automate many time-consuming tasks. Report generation, comparison sheets and other attention-diverting tasks can be performed by computer software.
Lessening your workload via automation will leave you free to focus on optimising agreements and efficiencies.
A reliable software system will also notify you of upcoming obstacles, renewals and other red-flag events arising from your portfolio of lease agreements. This means that it’s less likely you will incur missed service charges or activate automatic renewals.
Although a small-scale win in the grand scheme of things, the fact software is working to save you time and negate avoidable mistakes will mean you can spend your time working on other things.
To Be More Efficient
With a widespread portfolio of lease agreements, it’s vital that you centralise all of your data holdings in order to become more effective. If you have teams across different locations, nationally or internationally, it’s imperative that you drive efficiency by creating a central leasing hub.
All paperwork, agreement terms and conditions and other information should be stored in a centralised, electronic location. Some form of cloud storage is both desirable and feasible in order to allow easy collaboration and to avoid confusion.
And Avoid Duplicated Work
One of the most confusing examples of a widespread portfolio responsibility is that work is needlessly duplicated. Whether from different employees working on copies of the same Excel spreadsheet or from documents being lost and having to be recreated, many man-hours are lost due to inefficiencies like these.
A centralised lease management hub or tool will help you make sure that there are no more instances of duplicated work or documents.
Once again, when the time comes, be sure to make sure you negotiate as great a deal as possible. And there are various ways to do this.
More Favourable Clauses
From annual direct debit payments in return for a large discount to extended warranties and improved servicing, there will be a myriad of more favourable clauses on offer if you negotiate well enough.
Each and every lease agreement has had negotiation room built into it by the provider before it was signed. If you’re newly responsible for managing the company leases, take the opportunity to “renegotiate” in light of your loyalty to the provider, your impeccable payment history or the fact that better deals are available elsewhere and you’ll be signing one of them as soon as the opportunity arises.
Clauses exist within a lease agreement in order to protect both parties and offer opportunities to both sides. Don’t just let those clauses be a stick to beat the lessee with should they breach one or another – bring it to their attention and threaten to terminate as a result of their default unless they negotiate.
Improved Cash Flow
On this blog, we have discussed previously how every lease negotiation can be boiled down to both sides trying to optimise their cash flow to best suit their needs. The lessor will be looking for the highest rental payments possible for the longest period they can find somebody to agree to, and the lessee will be looking for the opposite.
From your point of view, try prioritising cash flow above all else. After all, cash is king and it will offer the company the chance to explore whole new avenues of investment. If, for example, you improve the cash flow out of the business by lowering payment amounts in exchange for an extended agreement, the time will come when you can negotiate it once again, anyway.
If the asset is becoming aged or inefficient, you will have earned the right to improve your terms on the asset accordingly thanks to the longstanding relationship with your lease provider.
Digital tools are key to achieving all of these tips and a whole lot more besides. Lease management software is available which will help you build on these tips you have just read and put them into action.
From anonymous market comparisons in order to help you better negotiate agreements to on-hand expert leasing advice, you can drive savings and become a hero when using a digitised lease management tool.