Case Study: Using Outsourced Lease Expert Leads to Major Savings

ARTICLE | November 18, 2024

Client: National Service-Based Corporation

Service: Outsourced Lease Accounting Services

Situation

A national service-based corporation had not regularly reviewed its lease costs, particularly additional billings from landlords for Common Area Maintenance (CAM) expenses and real estate taxes. Upon adoption of the new lease standard (ASC 842), there was an increased focus on total lease costs, including all landlord billings, with leadership goals to maintain or reduce costs. The company already faced major challenges in ensuring compliance with the new lease standards (ASC 842) and struggled to find the internal resources to review and monitor landlord billings. Management decided to outsource the administration of lease accounting, including the review and audit of all landlord billings.

Resolution

Our lease accounting expert centralized the corporation’s lease management, consolidating document management, lease abstraction, lease classification, financial records, and critical date monitoring processes. A lease accounting expert reviews leases daily and has the ability to quickly identify lease clauses with an accounting impact. This resulted in a streamlined lease accounting function that significantly improved the corporation’s efficiency and compliance with current accounting standards.

In addition, they utilized a proven lease accounting technology solution that eliminated the need for the corporation to purchase full technology applications and systems and reduced internal training requirements.

Further, they conducted a full review of all additional landlord billings, including real estate tax and CAM “true-ups.” The process entails reviewing not only the bills and support, but also the lease to ensure all charges were appropriate under the agreement. This rigorous audit process ensured that the corporation was correctly paying for all landlord expenses at each location.

Outcome

As a result of outsourcing its lease accounting, the corporation was able to bypass the software selection cycle, reduce internal training requirements, and eliminate the need to hire specific resources to comply with the new standard. Our expert’s knowledge and efficient approach led to a significant improvement in the corporation’s lease accounting function and financial reporting.

The lease accounting expert identified overcharges by several landlords, leading to refunds and significant cost savings in the current and future periods.   The audit of landlord billings resulted in savings of over $200,000 during the first year.

Conclusion

The right expertise can make a significant difference when it comes to lease accounting. By choosing to outsource lease accounting functions to those with expertise, such as Insero & Co. CPAs, corporations are able to improve compliance, efficiency, and cost-effectiveness. This case study is a testament to the value of outsourcing lease accounting to experienced professionals.