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FinQuery

Are You Overpaying for Software? How Companies Can Maximize ROI in the SaaS Jungle

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As software expenses continue to rise, accounting departments are faced with the daunting task of managing these investments effectively. In a recent webinar, Jason Parker of FinQuery dives deep into the critical importance of effective software management in today’s business landscape. With software expenses, particularly in the SaaS space, becoming a larger portion of business budgets, organizations must prioritize proactive strategies and processes to manage these investments effectively.

The Growing Importance of Software Spend Management

Parker begins by discussing the rapid growth of software spend, particularly in the SaaS space, and the need for businesses to prioritize effective management strategies. As he points out, “Finance, of course, is responsible for making sure that the money spent at an organization returns the commensurate value that you’re looking for. So if I’m a finance professional, I want to make sure I have visibility into spend across the organization.”

Effective management is increasingly critical, with software expenses becoming a larger portion of business budgets. Organizations must understand and optimize software spend across various departments and functions to ensure investments align with business goals and deliver value.

The Challenges and Risks of Limited Visibility

One of the biggest obstacles to effective software management is limited visibility into software investments. Parker explores the challenges and risks associated with this lack of transparency, including:

  • Siloed decision-making
  • Complex contract structures
  • Inadequate understanding of software usage

These factors can lead to suboptimal renewal decisions, security risks, and wasted resources. Companies need to adopt a cross-functional approach and centralized processes to mitigate these risks and navigate the complexities of software management.

The Path to Optimization: Data-Driven Strategies and Processes

So, what can companies do to optimize their software investments and drive long-term success? Parker outlines several key strategies and processes, including:

  • Centralizing contract management
  • Automating IT processes
  • Making data-driven purchasing decisions

As he emphasizes, “You want to be intentional about this. You got to make sure that what you’re using these tools for is solving the intended problems.”

Another crucial aspect of effective software management is measuring success through metrics like subscription spend per resource and license utilization rates. Parker notes, “What we see today is that almost every business is overspending on software because they don’t have the information they need to make the best decision. Managing that subscription spend per resource is important because just about every business out there can reduce that spend and obtain even more value in their investments.”

By adopting these data-driven strategies and processes, companies can optimize their software investments, mitigate risks, and ensure their investments align with business goals and deliver value.

The Bottom Line: Prioritizing Software Asset Management for a Thriving Company

In an increasingly software-driven world, effective software management is no longer a nice-to-have but a critical imperative for companies seeking to thrive. As businesses become more reliant on technology, companies prioritizing cross-functional collaboration, centralized processes, and continuous optimization will be best positioned to navigate the complexities of software management and drive long-term success.

By adopting the strategies and processes outlined by Parker, companies can optimize their operations and better serve their clients in navigating the complexities of the digital landscape. To learn more about how your firm can master the art of software management, be sure to watch the full webinar recording.

From Modifications to Abandonments: A Deep Dive into ASC 842’s Most Complex Scenarios

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Adopting ASC 842 has completely updated lease accounting, presenting CPAs with a brand new set of guidelines for accounting for the various changes made to a lease agreement over its term. In a recent webinar, Jaron Moss, a CPA and technical accounting consultant at FinQuery, and former auditor, delved into the intricacies of applying ASC 842 to various lease scenarios, highlighting the challenges CPAs face in ensuring accurate financial reporting and compliance.

This article explores how the new lease accounting standards impact the day-to-day work of accountants, some of the complex scenarios encountered, and the skills and knowledge needed to navigate these complexities effectively.

Lease Modifications and Reassessments: Adapting to Changes

Lease modifications and reassessments are common scenarios that require CPAs to apply their understanding of ASC 842 to ensure accurate financial reporting. As Jaron Moss explains, “A modification is a change in the terms and conditions of a contract that results in a change in the scope or consideration of a lease. Essentially, you go to the lessor, renegotiate the contract, and you get a new contract. That’s a modification or amendment.”

Modifications involve changes in lease terms, while reassessments occur when the lessee’s facts and assumptions change without renegotiating with the lessor. Accounting for modifications and reassessments differs in terms of:

  • Reallocating consideration
  • Reassessing lease classification
  • Updating discount rates

Navigating lease modifications and reassessments requires a deep understanding of ASC 842 and the ability to adapt to changes in lease contracts.

Partial Lease Terminations: Two Approaches to Consider

Partial lease terminations present another complex scenario CPAs must handle in accordance with ASC 842. These occur when a lessee reduces the leased assets to a lesser amount. Accountants must be aware of two approaches for accounting for partial terminations:

  1. Adjusting the right-of-use asset (ROU asset) proportionate to the change in the lease liability
  2. Adjusting the ROU asset proportionate to the change in the asset itself

Calculating adjustments to the lease liability and ROU asset, and a gain or loss on the partial termination requires a thorough understanding of the different approaches to ensure accurate accounting.

Lease Impairments and Abandonments: Identifying and Accounting for Complexities

Lease impairments and abandonments are complex scenarios that require CPAs to apply judgment and knowledge of ASC 842 and related guidance. “When a lease impairment is recognized, the carrying amount of the lease is adjusted downward to its recoverable amount, which is the higher of the fair value less the cost of disposal or its present value of future cash flows,” explains Jaron Moss.

Lease impairments occur when the recoverable amount of a leased asset falls below its carrying amount. Lease abandonments occur when the lessee stops using a leased asset before the lease term expires without the lessor’s consent. Accountants must be able to identify and account for lease impairments and abandonments appropriately. Leveraging technology allows CPAs to handle complex calculations more efficiently and focus on providing value-added insights.

As Jaron Moss states, “Keep in mind, using a tool is one of the best ways to handle these types of complex lease changes, so you don’t have to spend your time on these tedious, complex calculations. You can focus on the areas that add more value to your organization.” 

Those looking for a tool to assist with the complexities of lease accounting and compliance should consider the solutions offered by FinQuery.

Embracing the Future of Lease Accounting

The adoption of ASC 842 has significantly impacted the accounting profession, requiring CPAs to stay up-to-date with the latest guidance and best practices. Accountants who can effectively navigate lease accounting complexities will be better positioned to serve their clients and organizations in the post-ASC 842 landscape.

To gain a deeper understanding of the complexities of lease accounting under ASC 842 and learn how to navigate these challenges effectively, watch the webinar recording.