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Lease Budgeting Process: What to Consider

 

Why is budgeting and forecasting important?

Budgeting and forecasting is important because it helps organizations plan their finances effectively. Budgeting helps businesses estimate their expenses fairly accurately and thus, make the right business decisions related to finance, new hiring and other critical business areas. It also helps them in planning how, when and where their funds will be invested and offers some protection against unforeseen business emergencies. From the real estate perspective, lease forecasting and budgeting for lease expenses play a crucial role in helping both–landlords and tenants factor for the expenses related to the lease. Lease budgeting and forecasting is a small part of the overall budgeting process for an organization, but, when dealing with a large lease portfolio consisting of hundreds or thousands of leases, lease budgeting assumes a very significant role.

Lease budgeting tools: More than just spreadsheets

Talk about budgeting and the first thing that comes to mind is, spreadsheets: Complex cash flow predictions, ROI computations and assumptions all crammed into a spreadsheet. However that is fast changing, especially in case of lease budgeting, thanks to advanced lease management and lease accounting software platforms. These lease accounting and lease budgeting software allow you to-

-Get a 360-degree view of your leases and their key financial components

-Compute cash inflows and outflows in a few click

-Generate models and forecast lease-related income and expenses for a longer period of time

-Understand and make sense of complex lease data easily through visual means such as pie charts and bar graphs

What to consider when budgeting for your leases?

When preparing your lease budget, make sure you take the following items into account-

  • The key lease elements you want to budget for. There are various expense items/cash flows in a lease. You need to identify which ones you want to budget for. Usually, CAM or common area maintenance charge is a big element, but there are others like real estate taxes, snow removal services, etc, which may have to be budgeted for as well.
  • Rely on the last few year’s actual amounts to prepare a budget with minimal variance. Looking at the actual lease portfolio expenses of last 3 or 5 years will help you prepare a lease budget that’s as close to the actual expense as possible
  • As with any other lease administration and accounting function, attention to detail is key when preparing your lease budget. Include forecasts for every single expense that you can account for.
  • Look at the last few year’s variance reports. Variance reports tell you the difference between your budgeted and actual cash flows. Learning about the variances over the years and understanding why they happened will help you prepare a more accurate lease budget.
  • Don’t forget to factor market forecasts and predictions. While it makes sense to rely on historical cash flow trends, also take into account market predictions for your lease locations. Market predictions can have significant impact on lease cash flows.

Resource planning for the budgeting process

Lease budgeting is time-consuming and labor intensive, even if you have the best lease accounting software at your disposal. Though it is not a continuous process, it needs to be done every year, in a timely manner. So, one thing for you to think through is, whether you have enough resources to devote to this process. Do you have an in-house lease administration or that can take care of your lease budgeting? Or are you relying on your accounting team? There are very specific lease elements to consider where you would need staff with lease analysis experience to weigh in. On the other hand, if you are relying on your lease administrators, you may end up diluting their focus from their regular lease administration tasks during the budget season. As a result, you may fall behind on maintaining your lease portfolio and keeping it up-to-date.  You could consider enlisting the support of an experienced lease accounting and administration services provider. Especially when you have a large lease portfolio with hundreds or thousands of leases spread across the country. A lease administration vendor who specializes lease budgeting will add a lot of value to your budgeting process through their expertise, industry knowledge and experience. Alternatively, you can outsource your day-to-day lease administration activities to them during the budget season and have your in-house lease administration or lease accounting team focus on lease budgeting while your lease administration vendor’s team of experienced lease administrators ensure you are always on top of your lease portfolio.

Why perform lease audits?

 

The term, lease audit, refers to auditing of a lease abstract in the light of the original lease documents. Lease audits are usually required if your lease abstracts are older and your leases have been amended or renewed since the original lease was abstracted. If the leases were amended or any addendums were made to them at a later date, you would want to ensure that the lease abstracts reflect the most recent information, which won’t be the case if the lease abstraction was done before the amendment/addendum was executed.

If you already have lease abstracts, it is time to take a good look at them and find out where you really stand in terms of their utility. Are your lease abstracts really serving their intended purpose? A lease audit can help you determine this and also identify the data lacunae and inaccuracies.

You could also commission lease audits if you are not satisfied with the quality of your existing lease abstracts. For example, if you notice that your lease administrators are consistently having a tough time staying on top of critical dates, payments, notices, etc, and are scrambling for data in the last minute, there could be more to the problem than what meets the eye. If such misses are frequent, it could be indicating a problem at the very core of your lease database–the lease abstracts. Either your lease abstracts are inaccurate, meaning they don’t have the right information, or they may be incomplete in the sense that they may have not captured lease data that is critical to effective administration of the leases in your portfolio. A lease audit will help you figure out the root cause of the problem and fix it once and for all.

Another good time to have your lease abstracts audited is when moving your leases and lease abstracts from one lease administration software to another, or even if you are making the big switch from spreadsheets to a more robust lease administration platform. As you invest in quality lease administration software  with a view to streamline your lease management process, you don’t want to start off with outdated or inaccurate data. A lease audit ensures the information you move to your new lease administration system is accurate and useful.

However, lease audits are time consuming and this process not only requires a keen eye for detail but also a lot of patience and an in-depth understanding of lease accounting and lease language. The whole process of lease auditing is time-intensive and your existing resources may be too busy to invest their undivided attention into the audit. Partnering with a trusted lease abstraction service provider ensures your lease abstracts are 100% accurate, comprehensive and complete with no missing data. Getting an experienced and trusted lease administration services provider to audit your leases can also help by bringing to light any instances where critical lease data may have been missed out. A lease administration services vendor with enough expertise and perspective into the lease abstraction process will also be able to identify any shortcomings in your original lease abstract template. They can help you make changes to your lease abstract template so it is more comprehensive and captures the lease information that matters to you, going forward.

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a  trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

Should you opt for AI-based Lease Abstraction?

 

AI-based lease abstraction, also known as machine learning powered lease abstraction refers to the process of abstracting leases using a lease abstraction software. Typically, AI-based lease abstraction involves uploading the lease and its related documents onto a lease abstraction platform or software, which then uses artificial intelligence to extract the key financial and non-financial data from the documents and presents it in the desired format. The output is usually based on a standard template that is already uploaded or present in the system. AI-based lease abstraction is becoming increasingly popular because it offers some great advantages over the traditional, manual lease abstraction process. Some of the benefits of AI-based lease abstraction include-

Volume and speed

Since AI-based lease abstraction involves deploying a lease abstraction software to abstract the leases, it is way faster than manual lease abstraction. Depending on the type of lease and accompanying documents, abstracting a lease manually could take anywhere from one hour to three, which can be accomplished in just a few minutes using a lease abstraction software. This lightning speed also makes it possible to get more leases abstracted within a short time period, thus improving the overall volume of leases abstracted significantly.

Standardization

With AI-based lease abstraction, you enjoy greater consistency and standardization when it comes to your lease abstracts. For example, when you have lease analysts abstracting leases, chances are, 2 different lease analysts may abstract a clause that’s essentially the same in different manners. While the meaning may still be the same, the overall sentence structure and words used may vary. Similar challenges may be observed in numerical fields as well. For example, someone may put the date as Jan 1, while another lease analyst might use January 1. When you have a lease abstraction software abstracting your leases, you don’t have to worry about consistency and standardization.

Better utilization of resources

With AI-based lease abstraction in the picture, you can divert your in-house lease analysts (if you have a in-house lease abstraction team) towards other, more critical lease portfolio management tasks such as CAM audits, Expense recovery, Invoice processing, etc.

Scale up faster without pressure on your in-house lease team

AI-based lease abstraction allows you to scale your lease portfolio without overburdening your in-house lease abstraction team. It ensures you have the lease abstracts of all the leases in your portfolio, no matter how recent. Just input the lease documents into the software and wait for a couple of minutes to get an abstract that you can use for your lease administration purposes.

AI-based lease abstraction can thus play a key role in

  • Helping you stay on top of your lease portfolio
  • Make your lease portfolio management more cost-effective and efficient
  • Allowing you to scale your lease portfolio without additional pressure on your existing lease analysts
  • Helping you easily create and  maintain a standardized set of lease abstracts

However, AI-based lease abstraction does have a major drawback. It may not be as accurate and trustworthy as manual abstraction done by expert lease analysts. Leases are complex documents, sometimes running to hundreds of pages, with multiple addendums and amendments. There may be emails or in some cases even handwritten notes specifying changes to them. While AI-based lease abstraction software platforms are intelligent, there are chances that something may slip through the cracks affecting the accuracy of your lease abstract. Hence it makes sense to have experienced lease analysts review all the leases abstracted by lease abstraction software platforms to ensure 100% accuracy of your lease abstracts.

Lease Abstraction: More than Just Data Extraction

 

Lease abstraction is the process of extracting key information from lease agreements and summarizing it in a concise format. This information can then be used to manage leases more effectively, make informed business decisions, and comply with regulations.

There are many reasons why businesses get their leases abstracted. Some of the most common reasons include:

To improve lease management: Lease abstraction can help businesses track lease expiration dates, rent payments, and other important information. This can help to prevent late payments, lease term breaches, and other problems.

To make informed decisions: Lease abstraction can provide businesses with insights into their lease portfolio. This information can be used to make decisions about lease renewals, tenant improvements, and other matters.

While lease abstraction can be a valuable tool, it is important to choose an experienced vendor who can provide more than just data extraction. A good vendor will also be able to:

Help you build the right lease abstract templates: Lease abstract templates should be customized to meet the specific needs of your business. An experienced lease abstraction vendor will work with you to create templates that are easy to use and that capture the information you need.

Help you identify missing documents in your lease portfolio: It is not uncommon for businesses to lose track of lease documents. A trusted lease abstraction vendor can help you to identify missing documents and to ensure that your lease portfolio is complete.

Streamline your lease management and administration process: Lease abstraction can help to streamline the lease management and administration process. An expert lease abstraction service provider usually has the tools and resources to help you to automate tasks, reduce errors, and improve efficiency.

Take care of seasonal lease administration tasks: Some lease administration tasks, such as CAM reconciliation, are only required on a seasonal basis. A comprehensive lease services vendor can take care of these tasks for you so that you can focus on other priorities.

If you are considering lease abstraction, it is important to choose a lease abstraction vendor who can provide more than just data extraction. Here are some additional benefits of working with an expert lease abstraction vendor:

  • They have the expertise and experience to extract the most important information from your lease agreements.
  • They can use their knowledge of lease law to ensure that your lease abstracts are accurate and compliant.
  • They can help you to create a standardized lease abstract template that can be used for all of your leases.
  • They can help you to automate the lease abstraction process, which can save you time and money.
  • They can provide you with ongoing support and maintenance, so you can be confident that your lease abstracts are always up-to-date.

If you are looking for a way to improve your lease management, lease abstraction is a great option. By working with an expert lease abstraction service provider , you can get more than just data extraction. You can get a valuable partner who can help you to manage your leases more effectively and to comply with regulations.

The Strategic Advantages of Outsourcing Lease Abstraction: Unlocking Efficiency and Accuracy

 

To optimize lease management processes and enhance strategic decision-making, companies are increasingly turning to lease abstraction services provided by specialized vendors. In this blog, we discuss how businesses across different industries can benefit from outsourcing their lease abstraction process. 

Maximizing Financial Efficiency with Lease Abstraction

Outsourcing lease abstraction allows your organization to harness the expertise of skilled professionals without diverting internal resources. Lease abstraction vendors specialize in extracting critical lease data, such as terms, rent structures, and clauses, with unparalleled accuracy. This ensures that financial information is complete, accurate, and up-to-date, empowering you to make informed decisions with confidence.

Enhancing Lease Administration Efficiency

The day-to-day management of lease portfolios can be a complex and time-consuming endeavor. Outsourcing lease abstraction and administration unburdens the internal lease administration team from the meticulous yet repetitive tasks, enabling them to focus on higher-value strategic initiatives. By outsourcing your lease abstraction to a specialized lease abstraction service provider, you ensure consistent, standardized, and error-free abstraction, reducing the risk of discrepancies and lease misinterpretations.

Cost-Effective Resource Allocation

CFOs are acutely aware of the bottom line, and outsourcing lease abstraction aligns with prudent financial management. Engaging a lease abstraction vendor eliminates the need for investing in additional in-house resources or training, ultimately saving costs related to recruitment, training, and ongoing management. The scalability of outsourcing means you pay for the services you need, precisely when you need them, providing a flexible cost structure.

Accelerating Decision-Making

In the fast-paced business environment, swift decision-making is pivotal. Outsourcing lease abstraction to a trusted lease abstraction service provider expedites the process of acquiring essential lease data, ensuring that critical information is readily available for analysis. 

Mitigating Risk and Ensuring Compliance

Lease abstraction vendors are well-versed in navigating the complex lease clauses and terms. Their lease knowledge and expertise translates to accurate abstraction that mitigates the risk of missed obligations or misinterpreted terms. By outsourcing lease abstraction to a global lease services provider, your company ensures that lease data is correctly extracted and organized, reducing the potential for compliance breaches and legal disputes.

In conclusion, outsourcing lease abstraction offers a strategic advantage for businesses. By leveraging the expertise of specialized lease abstraction vendors, companies can streamline operations, reduce costs, enhance decision-making, and mitigate risks associated with lease management. 

If you’re ready to unlock the benefits of outsourced lease abstraction, consider partnering with a reputable lease abstraction vendor. Contact us today to discover how our tailored solutions can elevate your lease management strategy to new heights.

Leveraging Lease Abstracts for Efficient Real Estate Portfolio Management

 

For retailers, a large real estate lease portfolio can be both a blessing and a challenge. On one hand, it provides opportunities for growth and expansion; on the other, it demands meticulous management to ensure compliance, cost-effectiveness, and smooth operations. Enter the game-changing solution: lease abstracts. These condensed, organized summaries of lease agreements hold the key to unlocking the full potential of a retail business by simplifying lease management processes. In this blog, we explore how lease abstracts can aid retailers in efficiently handling their real estate lease portfolio and the benefits of partnering with an experienced and trusted lease abstraction vendor.

Understanding Lease Abstracts

A lease abstract is a crucial document that distills complex lease agreements into a concise format, capturing essential information such as lease terms, rental obligations, key dates, renewal options, and other relevant clauses. By extracting and summarizing the most pertinent details, lease abstracts offer retailers a clear snapshot of their lease portfolio, making it easier to track and manage critical lease data.

How Lease Abstracts Aid Retailers

1. Enhanced Decision-making: With a vast portfolio of retail spaces, retailers need quick access to vital lease data to make informed decisions about lease renewals, expansions, and relocations. Lease abstracts provide this information in an easily digestible format, empowering retailers to strategize effectively and seize growth opportunities without delay.

2. Simplified Compliance: Non-compliance with lease terms can lead to costly penalties and legal disputes. Lease abstracts help retailers stay on top of their obligations by highlighting important dates, such as rent payments, renewal options, and notice periods, enabling them to proactively meet lease requirements and avoid potential pitfalls.

3. Cost Efficiency: Retailers often have multiple leases across different locations, each with unique terms and conditions. Lease abstracts streamline the process of comparing and analyzing lease agreements, identifying potential cost-saving opportunities, and negotiating favorable terms, leading to better financial outcomes.

4. Time Savings: Manually reviewing and interpreting complex lease documents can be time-consuming and error-prone. Lease abstracts condense the information, saving valuable time and resources while providing the necessary insights for quick decision-making.

How an Experienced and Trusted Lease Abstraction Vendor Can Help

Collaborating with a reliable lease abstraction vendor can amplify the benefits of lease abstracts for retailers in several ways:

1. Expertise and Accuracy: Seasoned lease abstraction vendors possess a deep understanding of real estate leases and related legal nuances. Their expertise ensures accurate and comprehensive abstracts, minimizing the risk of overlooking critical details and errors.

2. Scalability: As retailers continue to grow, the volume of leases also increases. A proficient lease abstraction vendor is equipped to handle large portfolios efficiently, maintaining accuracy and turnaround times even with expanding demands.

3. Customization: Every retailer’s lease portfolio is unique, with specific data points and reporting requirements. A trusted lease abstraction vendor can tailor the abstracts to meet individual needs, providing personalized insights for effective decision-making.

4. Data Security and Confidentiality: Lease agreements contain sensitive information that must be handled with utmost confidentiality. Reputable lease abstraction vendors implement robust security measures to safeguard client data, ensuring peace of mind for retailers.

In conclusion, lease abstracts offer retailers a powerful tool for managing their extensive real estate lease portfolios. By consolidating complex lease agreements into a digestible format, retailers gain better control over their lease data, leading to enhanced decision-making, compliance, cost efficiency, and time savings. By partnering with an experienced and trusted lease abstraction vendor, retailers can optimize the benefits of lease abstracts, empowering them to focus on their core business and unlock greater success in the competitive retail landscape.