Whenever customers raise the subject of lease accounting it puts me in an awkward position. I’m clearly someone who normally flies the NetSuite flag in all weathers. Let’s be honest, it does an awful lot, incredibly well. NetSuite Lease Accounting, however, is rarely your best lease accounting option.
There are two types of businesses who might be interested in what NetSuite can offer in this lease accounting space.
Some organizations have just a handful of leases they currently account for on spreadsheets. They might already be using NetSuite and want to see if they can bring this additional piece of accounting in to the system.
Other organizations operate a purely lease based business model and cannot implement NetSuite without a sufficient and robust solution.
In this article we are going to look at features and products to meet the needs of both these groups. We will explore the capabilities within the NetSuite Fixed Asset Management module, considering its limitations. We will also introduce third-party solutions that can provide a more specialized and complete package.
Use the information provided here to make an informed decision about how you approach lease accounting with your NetSuite system.
Does NetSuite have a Lease Accounting Module?
Lease Accounting is handled in NetSuite through a number of features built in to the Fixed Asset Management module
Fixed Asset Management is an add-on module for NetSuite that handles fixed assets really well. The Lease Accounting features are limited and feel like somewhat of an afterthought. That said, they will meet some peoples needs.
The NetSuite Lease Accounting solution allows companies to do the following –
- Keep an active lease register.
- Keep schedules and histories of lease payments.
- Generate lease amortization schedules.
- Account for interest incurred on leased assets.
Regulatory compliance is often an important factor when considering a lease accounting solution. NetSuite’s Fixed Asset Management module is compliant with the IFRS 16 and ASC 842 standards for lease.
Limitations of NetSuite Lease Accounting
All the above sounds very positive, so where does NetSuite fall short? Here are just a few points:
- Basic Lease Records – Lease records can be customized with additional fields but it should be said that the default form is fairly limited. You will almost certainly need to add a host of new fields to truly capture the relevant information required to make NetSuite the primary home for your lease register.
- Unintuitive/clunky setup – The accounting setup is so basic to the point that it can be confusing. It requires practical knowledge of how the system will be using each account. Operating and finance leases should be treated differently but this isn’t spelt out in the accounting setup.
- Not suitable for lessors – This solution is not designed for lessors. Sure, you could customize NetSuite to automate the relevant postings and schedules but if you are going to invest further in your lease accounting solution I would rather you scope out one of the third party options detailed below.
- Limited reporting – There are only five default reports in the fixed asset module dedicated to your lease register. Anything beyond this needs to be manually created via the saved search feature. This is disappointing and realistically most companies are going to, at some point, require something beyond this scope.
Third Party Solutions for NetSuite Lease Accounting
If you are looking at alternatives to the Fixed Asset Management solution then you’re in luck. There are a host of third party options on the market addressing lease management in varying forms.
Below I have picked out some more notable solutions. I am not affiliated with any of these products so the facts are facts and the opinions are my own!
Summary of Third Party Lease Accounting Options for NetSuite.
|NetLessor / NetLease
|Native in NetSuite.
Solutions for both lessees and lessors – NetLease and NetLessor.
Very strong accounting. Built on a solid lease accounting foundation.
Operating and finance leases managed.
|Integration required with additional software.
A leading player in the lease management space. Not specifically designed for NetSuite but does integrate.
The same solution can be used for both lessees and lessors.
Operating and finance leases managed.
|LeaseQuery serves lessees. For broader lessor functionality there is LeaseQuery Advance.
LeaseQuery is native in NetSuite. LeaseQuery Advance is not.
Strong focus on accounting impact.
Operating and finance leases managed.
NetLessor and NetLease from Netgain
I haven’t been exposed to every lease management solution for NetSuite, but of those I am familiar with, Netgain is my favorite.
Netgain provide native solutions which means they are accessed directly through the NetSuite UI. There are dedicated modules for lessors and lessees to ensure the primary needs for both business models can be serviced.
The layout of the module is not dissimilar to NetSuite’s Fixed Asset Management and navigation is very intuitive. Each lease has it’s own record that holds the primary information as well as sublists for amortization schedules, payment dates and related journal entries.
Amortization schedules are automatically generated, as are liability and right of use balances. Lease journals and monthly bills can be run manually or for your entire register and everything is compliant with the most up to date standards at any given time.
Visual Lease is a true leader in the world of lease management in 2023. This is a slightly different offering to the other two systems I have pitched here since it is not a native NetSuite product.
Visual Lease offer a standalone piece of software that can be integrated with NetSuite. The risk with a single all encompassing piece of kit is that it focuses on the larger segment of the market – lessees. This can sometimes leave the lessor functionality a little lacking.
This is not a problem with Visual Lease as their product is advanced. One standout aspect is the reporting capability. There are countless out of the box report templates including detailed disclosure reports to outline standard compliance.
Visual Lease offer a two way API to connect with NetSuite. This means you can use Visual Lease as your primary reporting tool for leases and be comfortable that data is always true and consistent.
LeaseQuery and LeaseQuery Advance
LeaseQuery is another native in NetSuite solution for managing and accounting for your lease register.
LeaseQuery is a fantastically intuitive and sensible solution but frustratingly, if you are a lessor, you almost certainly need their advanced model, LeaseQuery Advance. The downside to that is that LeaseQuery Advance is not yet a native tool.
If we just consider the basic model here then there is still an awful lot to like; automated amortization schedules, automated journal entries, regulatory compliance and comprehensive disclosure reports.
As you can see there is lot’s of option available for lease accounting solutions to integrate with NetSuite. Some of these are good enough for small scale lessee portfolios and some are better suited to large scale lessor business models.
The systems detailed in the above article are just a few of the options I have become familiar with over the years but needless to say there is plenty more on the market. Let me know if there is a product you recommend or you feel deserves more attention. Get in touch.