Lease Management Software Explained

Leasing companies 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 that lease management software is designed to accomodate..

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, Leasing companies 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 Leasing companies 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 Lease management software like 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.

Trying to provide all of this accounting detail, in a timely fashion, using data stored in mish-mash of unconnected and incompatible computer systems is proving to be more of a headache than many leasing companies can handle.

It is fortunate, then, that leading ERP vendors have recently turned their attention to the leasing industry, offering fully-integrated, internationalized suites of enterprise management systems for all types of Leasing companies, business model and ticket size.

Leasing companies have been quick to take advantage of the benefits provided by the latest comprehensive, web-enabled ERP systems. A case in point is Hasler Inc., the financing division of the world's second-largest supplier of mailroom equipment and logistics solutions, Neopost Group. Hasler recently chose to automate its business using Oracle Lease Management, which was designed specifically for the leasing industry in conjunction with one of the biggest leasing organizations in the world.

Hasler needed a set of applications to help drive down costs while increasing the number of financing deals won on the sale of its products - essential for maintaining their advantage in a highly competitive market. 'Our sales force and third-party dealers can turn elsewhere for financing, so it is critical to provide a high level of value if we're going to compete in the leasing marketplace,' says Stephen Dickeson, chief financial officer and general manager of the Neopost Group's North American leasing operations. 'We had to give our sales channel the tools they need to win.'

After a six-month implementation, Hasler Financial Services is now live on Oracle Lease Management and Oracle Financials and seeing significant benefits, including improved lease management processes and reduced administrative work related to the creation and maintenance of leases.

Its direct sales force and third-party dealers can now access a self-service lease portal, where they can submit credit applications 24 hours a day. That information is immediately fed into the Oracle Lease Management solution, reducing the need for manual re-entry of information and giving the sales force and dealers the ability to interact with Hasler whenever they choose.

'Improving the origination process is one of the top issues facing financial service providers today,' says Mark Jones, leasing industry specialist for consultancy Cap Gemini Ernst & Young, which conducted the Hasler implementation. 'Providing the tools and processes for effective boarding improves service and reduces operating costs throughout the life of the contract.'

Hasler employees will also soon be able to respond electronically to customer requests for documents such as bills, invoices, and contracts, rather than having to locate and deliver documents manually. The new process is expected to be far more efficient, cost much less to complete and improve customer service satisfaction levels.

As well as giving leasing companies the ability to automate and speed up processes and respond more effectively to customers, standardized lease management software is at last giving senior management access to detailed business information from across the company, vital for making informed decisions about future strategy and direction.

With every country operation and division running the same underlying software - localized, nevertheless, in terms of language and accounting rules - data can be accurately consolidated, compared and queried across the enterprise. The resulting transparency can quickly show up areas of potential growth and areas of concern, enabling  Leasing companies to respond quickly to changing patterns in the marketplace.

In Europe, this is nowhere more useful than in the rapidly emerging markets of Eastern Europe, keen to catch up in terms of industrial sophistication with the West. The former Soviet bloc represents a massive market opportunity for equipment leasing companies, especially in the new EU member states, and leasing companies that are able to manage their operations intelligently and efficiently across multiple countries in this market are likely to realize significant gains.

With the leasing market increasingly dominated by a few large providers, the pressure to remain competitive to survive has never been so strong. The additional pressure of complying with new accounting regulations is likely to force some Leasing companies out of business.

In this environment, a comprehensive, web-enabled ERP system could be a judicious investment for leasing companies looking to capitalize on every market opportunity while simultaneously reducing internal costs and coping with the increasingly stringent burden of regulation.