Day to day activity slows down at the end of the calendar year for many real estate and lease administration teams. Between holiday celebrations and perhaps some scheduled time away from the office, this time of year can offer dedicated time to spend closing out current year activity and planning for the upcoming months. There are areas where time and effort now can reduce beginning of the year chaos and position your team for success in the coming months. Here is our list of five key things you can focus on to help your team start the new year strong:
1. Major real estate portfolio events of the current year
Reviewing your portfolio changes is helpful to prepare for potential financial audit questions, lease accounting changes, and financial reporting disclosures. New leases, lease expirations or terminations, options taken or not taken, and changes in lease terms or rent schedules are examples of items that can have a financial statement impact under the lease accounting standard. Knowing where these changes are in your portfolio foreshadows where internal and external auditors and accountants might dedicate additional focus.
2. Data and document quality
A best practice to assist with maintaining database accuracy is to conduct a periodic data test. Lessors will likely notify a lessee if the rent payment is incorrect, and therefore the monthly rent process will usually uncover any payment-related irregularities as they occur. However, most lease administration systems track much more than just payment terms. To conduct a data quality test, first identify a sampling of leases. The sample set should cover various lease and asset types, sizes, and locations to be representative of the entire lease population. Assess the accuracy of the system data, the consistency of the abstraction, and the presence of all the pertinent lease documents.
3. Staffing and internal controls
In addition to the budget process that many companies complete, end of the year is a good time to evaluate whether resources are optimally matched to department needs and processes adequately control for potentially harmful events. Consider whether the right people are in the right roles. Are there training needs or role adjustments? Review processes and work flows with a focus on maintaining quality and streamlining operations while mitigating any potential risk. Process review may also be done at a high level as a part of an annual financial audit, but auditors perform their audit procedures based on a different set of criteria than someone that is involved daily.
4. Audit and financial statement activities
Financial and internal audit teams usually request the same or similar reports from year to year, and many times those requests have tight deadlines. If time allows, get a jump start on generating and reviewing reports that are commonly requested for year-end close, such as a portfolio or asset listing, new and expired leases, option activity, lease accounting schedules, and others that pertain to your situation. Thinking forward and preparing now will be better than rushing to accommodate a tight deadline early next year.
5. Reconciliation invoice tracking and review
One way to achieve real estate cost savings and avoidance is to establish a process to track and review operating expense and real estate tax expenses billed by landlords. The first step is to know which real estate leases are subject to this type of billing. Create a list of the leases where you expect reconciliation billings in the coming year and check them off as you receive and review the calculations. If you do not receive a reconciliation, request it from your landlord as you could be due credits if the total monthly estimated payments made exceed your share of annual expenses. When you do receive one, review it carefully against your lease documents and look for errors or overcharges.
What other tasks do you complete when the office is quieter than normal that can lead your team to future success? Drop us a note with your thoughts.
Scribcor Global Lease Administration is committed to helping clients successfully administer multi-faceted lease portfolios. Interested in how Scribcor can bring their first-class approach to your leases? Contact us today to explore the possibilities!