Your commercial lease transactions are integral to managing your monthly overheads, ensuring your business is profitable, and making the most of its commercial lease investments.
How can you improve the management of your commercial lease transactions?
To manage your commercial lease transactions more effectively, you must ensure your lease accounting and lease management strategies are seamless. Keep reading to learn how to improve the management of your lease transactions.
What Is Involved In Commercial Lease Management?
Your commercial lease transactions all fall under the lease management umbrella. Here, we will discuss the main processes involved in commercial lease management.
The Lease Agreement
Once you or your company has found the perfect commercial space and agreed on the lease terms, a lease abstract is created. The lease abstract provides all departments with easy access to vital information regarding the lease. Once the abstract has been completed, the real estate agent/landlord will prepare the property for lease and hand the keys over.
Amending The Lease Throughout The Term
You must amend the lease if there are any changes in your contact details. Similarly, you must amend the lease regarding any terminations or renewals of the lease agreement. Any additional payments in the lease, such as area maintenance charges and taxes, must be processed throughout the term by your financial team.
Audits And Reporting
Landlords/owners of commercial spaces should have regular audits and reports conducted throughout the lease. These audits show if the landlord is meeting their legal obligations under the lease, document any maintenance/repair jobs, and double check invoices.
As the tenant, your financial department/accountant should also perform regular reports, ensuring you haven’t made any overpayments by frequently reviewing invoices, relevant data, and other documents. Your financial team needs to maintain an awareness of your lease payments to calculate whether your leases are producing the optimal ROI.
What Is Lease Accounting?
Lease accounting is crucial in managing a lease successfully. Commercial lease accounting involves analyzing and drafting financial statements to understand your financial health. These financial statements include:
- Income statements – the lease accounting process must generate income statements that track your income and expenses.
- Cash flow statements – the lease accounting process must draft reports that show the money moving in and out of your company over time.
- Balance sheets – the lease accounting process must track assets, liabilities, and shareholder equity and balance these figures.
5 Tips For Managing Your Commercial Lease Transactions
Now that you’re aware of the lease transactions that take place throughout a lease, we can discuss some of the ways you can improve the management of your commercial lease transactions.
Invest In Commercial Real Estate Management Software
The lease management process has a significant impact on lease accounting processes. Your lease management process must provide your financial department with frequent audits and reporting based on lease transactions. If your lease management process is running smoothly, so will your lease accounting.
You can host your commercial real estate processes on a single platform with commercial real estate management software. Lease accounting, lease management, transaction management, facilities management, construction management and more can be integrated into one platform. This tool gives you more valuable insight into your lease portfolio as a commercial tenant and ensures compliance.
Perform Market Analysis
Market research is essential to ensure your leases are priced to meet upcoming trends and news in the real estate market. Market analysis can help you to procure better properties and can help you to negotiate leases in line with current market conditions, giving you an advantage.
Photo by Austin Distel on Unsplash
Go Paperless
If you’re still using paper documents, you must consider switching to paperless and cloud-based solutions for your business. Without cloud-based solutions, your team will struggle to share reports and collaborate on the most updated versions of documents. Going paperless will establish more efficiency in the lease accounting and lease management process.
Pay More Attention To Detail In Your Lease Negotiations
Many companies focus on the more significant elements influencing lease negotiations’ expenses- standard area maintenance and base rent. However, focusing on more specific lease elements, such as parking and signage, can often be beneficial. Focusing on the details can minimize disputes and hassle down the line.
Find The Right Commercial Real Estate Broker
You need a responsive real estate broker that will be able to offer you excellent service, and you must ensure there are no conflicts of interest. Your real estate company should provide you with responses on the same day. If the broker is listing the property you are negotiating for, your real estate agent may not be able to represent your best interests. You need a real estate agent that will be able to help you get the most favorable lease terms. So, take a careful look at who is listing the properties you are interested in to ensure no conflict of interest.
Summary
Make lease accounting and lease management more efficient in your company by using valuable resources like lease accounting and lease management software. You can use cloud-based solutions to ensure that your team has access to the latest information for all transactions and reporting.