Lease abstraction is an important and critical part of many industries including commercial real estate, accounting, and legal. The process of extracting key and frequently used information within complex lease agreements into a concise easy to read summary, allows organizations to manage a variety of processes and operations efficiently, meet regulatory requirements and gain real-time insights that support strategic and profitable business decision making.
Many companies however, struggle to streamline their lease abstraction process. In the 2022 LeaseAccelerator global lease accounting survey, 48% of respondents have not fully integrated their lease management processes with existing ERP systems. It remains largely a manual time-consuming task with a myriad of challenges that derail many lease abstraction efforts. In this blog we will examine three common lease abstraction challenges and how Intelligent Document Processing solutions can help address these issues and streamline workflows for better outcomes.
1 – Lease Volume and Complexity
Many commercial real estate companies process and manage hundreds of thousands of leases each year. Most often these leases are scattered across decentralized systems within an organization. Nobody knows what is in these leases, for example lease terms, liabilities, and company risks. To make matters worse, extracting this content is often a manual error-prone process with complex paper trails, making it impossible to meet stringent deadlines. Furthermore, parsing through the language of clauses within hundreds of thousands of lease agreements to extract the relevant information creates a nightmare scenario for managers.
Clearly, managing, updating, and modifying lease information while ensuring high data accuracy and quality requires specialized skills and the right software technology.
2 – Rigorous Lease Accounting Requirements
In response to accounting standards ASC 842 issued by the Financial Accounting Standards Board, many organizations were caught off guard and are now scrambling to get their lease data into compliance with this new rule. With the requirement to bring operation leases onto the balance sheet, the current system of manual processes, siloed lease information buckets, inefficient data management and system controls makes meeting these requirements much more challenging. Moreover, many organizations lack the resources to extract and categorize lease information required by this new rule in a cost-effective manner without negatively impacting their bottom line.
3 – Leases in Foreign Languages
For many global organizations such as commercial real estate players, multi-lingual lease abstraction is critical to their profitability, yet many struggle with streamlining this process. Multi-lingual lease abstraction requires not only linguistic capabilities, but an in-depth knowledge of the lease terms and contract. Most companies lack these specialized skills and often end up with poor extraction results filled with errors and misinterpretation, leading to costly fines and other severe consequences.
Multi-lingual lease abstraction is huge undertaking, and many companies look to technology to bridge the gap.
The Benefits of Intelligent Document Processing for Lease Abstraction
Intelligent Document Processing (IDP) solutions are purpose-built for lease abstraction. IDP solutions can automatically extract key information from large volumes of leases more accurately and in less times than manual review.
For example, Cortical.io SemanticPro extracts lease data based on the meaning of words, categorizes this information using language unique to your organization and supports over 70 different languages. In addition, users can quickly compare changes between multiple documents, filter results and export them to common business tools for further analysis and compliance with regulatory requirements such as ASC 842. Furthermore, SemanticPro enhances human-in-the-loop or automated workflows.
In a recent project, Cortical.io SemanticPro helped a Big 4 accounting firm reduce lease abstraction time by 80%. For more information on how SemanticPro can streamline your lease abstraction workflows, please contact us at [email protected].
