I normally do not write about my clients or board positions, as it is often inappropriate and it is a form of “talking up my book”. Also, the blog is about B2B software, not me.
In the case of LeaseAccelerator, however, I’m going to make an exception. LeaseAccelerator, whose board I recently joined (hat tip to Jit Sinha at JMI Equity), addresses both an accounting compliance problem, as well as a procurement problem. It is a two-in-one solution which I think is really cool. But then again I find enterprise software interesting!
The Accounting/Compliance Problem
If you remember your accounting class, you will recall accounting for leases is a complete “pain-in-the-you-know-what”. (I remember one accounting exam consistently only of the lease-related footnotes from an airline’s 10-K. We had to figure out what the heck was going on.)
In the past couple of weeks, FASB finalized long-discussed changes to the accounting rules that will put most of the stuff in the footnotes right onto corporate balance sheets. As a result, it will be even more important for large companies to track the NPV of their leases–both real estate and equipment. (See Wall Street Journal article here). LeaseAccelerator offers software to help companies meet these accounting and compliance obligations for leased equipment in an automated way. That’s the accounting and compliance pitch.
The Procurement Problem
The procurement problem facing leased equipment I understand much better. I’ve even helped LeaseAccelerator write a white paper about it: “Five Best Practices for Managing Leased Equipment Spend in Manufacturing. (Catchy, huh?). You can download it here.
I’ve always been interested in spend categories that do not fit nicely into “one-size-fits-all” e-procurement systems. Usually, these spend categories do not fit because somewhere in the “source-to- settle” process, they have a unique sub-process or other aspect of the process the basic e-procurement systems do not address:
- In T&E it is credit card integration, online booking and employee reimbursement
- In contingent labor, it is resumes, time cards, 1099 reporting etc.
- In facilities services it is response times, repair duration, and the localized supply base
- In events management, it is hotel sourcing, change orders, localized vendor enablement and payment
In each case, a series of vendors has arisen (and thrived) to address the specialized category.
Leased equipment, like these other spend categories, has complications to it that keep this spend largely outside the basic e-procurement systems. In particular, there are three aspects of equipment leasing that a specialized system like LeaseAccelerator addresses:
- As mentioned above, the system handles the complicated accounting and compliance rules associated with leasing, which are not necessary in operating expense oriented tools
- LeaseAccelerator maintains a liquid marketplace of lessors, which is a distinct supply market from the equipment manufacturers, so lessees can unbundle equipment purchasing from financing. Lessees need not just rely on the deal the finance arm the selected manufacturer can give them. LeaseAccelerator provides a sourcing tool, supply base, and neutral templates for equipment leasing, to allow lessees to bid out their needs and global lessors to respond efficiently using reasonable terms. Lessors and lessees both win.
- LeaseAccelerator helps equipment lessees track the equipment to the “end-of-term” when important economic analysis and decisions have to be made on whether to renew, buy the equipment, or return the equipment. This decision is based on client need, technology changes during the lease, and secondary market conditions for the equipment at the end-of-term.
With US companies spending $1.5 trillion annually on plant, equipment, or software and 72% of them using some form of financing, there is a lot of opportunity for procurement departments to better manage this neglected category–and hence a lot of opportunity for LeaseAccelerator to help them do just that.