There are two main drivers to the renewed interest in lease arrangements. First, it's increasingly seen as an area that can save companies from wasteful spending they sometimes didn't even know they had. The second stems from compliance worries, given that the Securities and Exchange Commission issued new guidance last year and signaled its intention to take a closer look at leasing classifications under FAS 13. "What really matters, is there need to be internal process changes," says Joe Pucciarelli, research director at Framingham, Mass.-based IDC Corp. Years of consolidations have left many large companies with a disjointed system of oversight and management when it comes to leasing operations, and with harder regulatory scrutiny, more companies are finding it worth their while to analyze how they could improve their leasing arrangements. "This is all about implementing a new type of discipline," says Pucciarelli.

Some companies have seen the need to change sooner than others. Of nearly 1,200 financial restatements issued last year, more than 20% were related to lease accounting issues, according to research by Glass Lewis & Co. LLC, the San Francisco-based investment research and proxy advisory firm. "Lease accounting was the largest single factor for restatements, more so than any other accounting issue we track, such as revenue recognition or tax accounting," says Mark Grothe, research assistant at Glass Lewis. Leasing restatements tended to be concentrated among retail, restaurant, and oil and gas companies, but last year's clarification from regulators should result in fewer problems now that these companies have had enough time to adjust their reporting, Grothe predicts. The bigger issue for most companies, however, came from a separate June SEC report, in which regulators signaled the current lease accounting rules are in need of an overhaul.

Viewing leasing in terms of portfolio management can be an effective starting point. "Executives should be able to go from a summary of their portfolio to drill down to any lease schedule and then to the accounting for each asset," says Michael Keeler, CEO of Ecologic Leasing Solutions, a Great Falls, Va.-based outsourcer for leasing operations and accounting. "That allows companies to trust their data, then they can manage their risk and return, much as they would any other portfolio of assets."

Software vendors are stepping in to offer new ways to automate the process. Randy Guiler, director of corporate finance and risk at Tractor Supply Co., a $2 billion farm and ranch retail chain, has already seen big efficiency improvements in the six months the company has been using a Web-based lease management solution by Captara Corp. "It's a good tool for financial reporting," says Guiler, whose company is publicly traded and operates 595 stores in 37 states. "It saves our accounting team a significant number of hours in tracking leases and fulfilling financial reporting requirements. Because different people in the company have access to the Captara application, accounting doesn't have to spend time fulfilling lease information requests."

He particularly likes the controls the application provides, which compel consistent analyses of leases throughout the company, such as for lease-versus-buy decisions. "If you don't have control over your company's leasing, it ends up [being] a highly inefficient business function, with missed options in terms of evergreens and financing structures," says Michael Caglarcan, CEO at Captara. "It's also about optimizing cash, with decisions about what the right mix should be between operating leases and capital leases, and if a company is entering a lease at the right borrowing rate."

ALL IN THE FINANCE FAMILY

From an efficiency perspective, Guiler says the Captara system has also been a big help in organizing and analyzing lease requests for proposals (RFPs). He recently sent out an RFP for leases for 100 forklifts, and instead of reaching five or six lessors, he was able to contact 17 companies. "It provides a more competitive environment so we can select the proposal that best fits the company's needs," he says.

For Lawson Software, a maker of ERP systems for midsize companies in the retail, healthcare and government sectors, one of the biggest selling points of its lease accounting module is its integration with other core finance technologies. "Our key value proposition for leasing is integration with accounts payable, general ledger and asset management systems," says Burke Strucker, product strategist at Lawson. The system allows users in one department–say, A/P–to "drill around" to investigate the root cause of a leasing issue without having to log into and out of separate systems. "It's an efficiency and one of our key differentiators," Strucker says. It's one of an increasing number of choices companies have when it comes to tackling an issue that can save time, money and compliance headaches down the road.