Why LOIS is quicker and cheaper than spreadsheets
We understand that for many CFOs, IFRS 16 accounting using Excel spreadsheets may seem like the way forward. After all, spreadsheets are free, readily accessible, and most people can navigate their way around them with ease. Yet, there are major disadvantages to approaching your organisation's IFRS 16 accounting this way, such as:
- No audit trails. Once someone changes a cell and saves it, it is overwritten, making it difficult to track where errors occurred later.
- No controls over the spreadsheet calculations themselves. You don't know whether the final calculations are correct until audit time.
- No idea if whoever made the spreadsheet knew what they were doing in the first place. It may look good and looks like it works, but you have no idea what is really going on under the hood.
- No ability to report in different time periods. With leasing, you are processing a high volume of lease data that is regularly changing over time. A spreadsheet only captures a single point in time; therefore, you cannot look back to the past or forward to the future.
When you use spreadsheets, you introduce risk. Spreadsheets do not automate IFRS 16 accounting; you rely on the user doing the calculations correctly, which could have a severe audit consequence come financial year-end.
We get it, accountants like spreadsheets. They are comfortable with them, they know how to use them, they understand them. However, we are starting to see a lot more pressure applied from auditors on their clients to find alternative solutions. Of course, auditors need to remain impartial, but they are starting to get frustrated if they come across a client still using a spreadsheet because they know they can't rely on its accuracy, so they need to spend extra time going through it and checking everything line by line.
And let's be honest, if you are an accountant doing IFRS 16 compliance all day, it is as boring as [insert naughty word here]. Doing it all day, every day on a spreadsheet where you run the risk of getting it wrong and getting into trouble with your auditor can be soul-destroying.
You owe it to yourself to be more motivated by working on other projects that add value to the business and progress your career.
Has your organisation ever costed up the internal resources (both time and money) that go into IFRS 16 compliance?
For a company with only 200 leases, one full-time Financial Accountant can spend as much as 30% of their full-time job working on IFRS 16 compliance. The Financial Controller then can spend one full day a month reviewing and consulting on their work.
Added to this, you then pay your auditor three full days a year to review and approve your IFRS 16 work. Then moreover, you need to factor in a day a year for an Excel guru to come in and review your spreadsheet, maintain it, or update the formulas to accommodate any changes in the accounting standard itself. That equals circa 90 full days a year, multiplied by the day rate of your employees, auditors and consultants, spent on IFRS 16.
Alternatively, having a software system like LOIS gives you verified calculations that you know are correct because LOIS has ISO and SOC reports to prove the calculations are accurate.
Using LOIS is also efficient, as you don't even need highly skilled Excel or technical accounting users doing the data input. If they put the correct data in, the right outputs will come out.
Finally, LOIS is supported by qualified chartered lease accountants, so you don't need extra resource to come in and consult on your IFRS 16 process to improve efficiencies.
All this can significantly reduce the full days spent on IFRS 16 compliance down by two thirds, freeing up your team member's time, minimising audit risk and saving the business money.
Quadrent can also help maximise this ROI by using our lessor experience combined with your LOIS data to make even greater savings. Get in touch today if you'd like to find out how.
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