How to find the best IFRS 16 software

The accounting of leases in accordance with IFRS 16 has been mandatory for capital market-oriented companies since January 2019 and has since led to a far-reaching change in lease accounting.

But regardless of whether they are small businesses, medium-sized companies, or international corporations, many companies are still faced with the task of making their leasing processes more efficient and compliant. This may be because they have relied on manual processes or Excel spreadsheets in the past, or because the IFRS 16 software they use no longer meets today's requirements.

As experts in lease accounting and financial software, we know what is important when selecting suitable IFRS 16 software. In this guide, we provide practical information on the criteria that are crucial for finding lease accounting software that optimally supports your company – from functional coverage and user-friendliness to compliance and integration.

Why is choosing the right IFRS 16 software so essential?

Choosing the right IFRS 16 software is crucial to meeting the complex and detailed lease accounting requirements. Companies are faced with the challenge of correctly reporting almost all lease agreements in both balance sheet assets and liabilities, as well as in the income statement. It is not enough to simply comply with regulatory requirements – it is also necessary to map the variety of different lease types and contract terms flexibly and accurately.

In addition, process automation is crucial, as manual procedures are often time-consuming and error-prone. Powerful lease accounting software, therefore, not only supports the efficient processing and calculation of lease data, but also ensures transparent and comprehensible presentation of IFRS 16 results. This is particularly important for reporting, which must meet both internal requirements and the expectations of external auditors and stakeholders.

Only with software that comprehensively meets these requirements can lease accounting be made reliable, efficient, and compliant.

What makes the best IFRS 16 software?

The selection of the right IFRS 16 software should consider much more than just the range of functions. Other factors that are crucial for long-term success include

• how intuitive and user-friendly the lease accounting software is,
• how well it can be integrated into existing IT systems, and
• what support the provider offers.

A transparent cost structure and the flexibility to grow with your company are equally important. Only when these factors work together can the software meet the complex requirements of lease accounting and deliver lasting results.

1. Functional coverage of IFRS 16 requirements

The software must implement all requirements of the IFRS 16 standard completely and accurately to ensure legally compliant lease accounting. The software should also be adaptable to the specific requirements of the company, and the following details should be clarified in advance:

• Automatic contract evaluation: Can the software automatically calculate lease agreements in accordance with IFRS 16 (e.g., initial recognition of usage rights and lease liabilities at the present value of all lease payments and subsequent postings such as depreciation, amortization, and interest expense)?
• Mapping of diverse contract types: Does the IFRS 16 software entirely and compliantly capture not only classic lessee contracts, but also lessor contracts, sublease agreements, internal leases, and sale and leaseback transactions?
• Multi-GAAP capability: If required by the company, can the software map multiple accounting standards (e.g., IFRS, US GAAP, local GAAPs) in parallel to ensure consolidated reporting and legal compliance in different jurisdictions?
• Reporting and disclosures: Does the solution offer reporting functions that cover all relevant IFRS 16 disclosure requirements?
• Contract changes & revaluations: Are contract changes and revaluations automatically considered and documented?
• Forecasting and planning: Does the lease accounting software support the planning of future lease obligations and the budgeting of future IFRS 16 effects?
• Accounting in different currencies: Does the software offer the option of using different currencies, and how does the software convert currency rates?

2. User-friendliness & usability

Good usability ensures that your employees can use the IFRS 16 software efficiently, regardless of their technical background. Intuitive operation saves time, reduces errors, and increases acceptance within the company. At the same time, the software should also meet the requirements of experienced accounting professionals and digitally map their familiar working methods.

• Intuitive user interface: Is the software understandable even for employees without in-depth leasing or accounting knowledge?
• Transparent process steps: Is the entire leasing process clearly defined, from contract entry and export of posting folders to payment reconciliation and leasing reports?
• Mobile access: Does the software offer anytime access via a browser and enable multiple users to work simultaneously worldwide?
• Professional presentation for accounting experts: Does the solution support digital representations of familiar accounting elements, such as T-accounts or intermediate balance sheet steps, so that experienced professionals can work quickly and accurately?

3. Scalability & usage

Modern IFRS 16 software solutions such as Envoria enable rapid and efficient implementation within just 2 to 6 weeks. Depending on the size of the company and the number of users, the software should also be scalable. This is the only way to cope with growing requirements without changing the system.

• Fast implementation: How quickly can the software be implemented in the company, even with extensive contract portfolios of several hundred leases?
• Flexibility in the number of users: Can the software grow with your company – from a few users to several hundred?
• Multi-client capability: Does the software support multiple companies, subsidiaries, or group structures?
• Settlement of leased assets: Is settlement based exclusively on active leased assets?
• When converting from existing software/Excel solutions: Is there a clear, well-defined conversion process if you already report in accordance with IFRS?

4. Integration & interfaces

Modern IFRS 16 software must integrate seamlessly into your existing IT landscape. Interfaces and automation reduce manual entries and ensure data quality.

• ERP integration: Can the IFRS 16 software be connected to existing ERP systems such as SAP, Oracle, Microsoft Dynamics, or others?
• Data interfaces: Can data be imported and exported (e.g., Excel, CSV, API)?
• Automated data exchange: Are there functions for the automatic exchange of contract data or payment plans?

5. Support & updates

Even though there are currently few regulatory changes in the area of IFRS 16, questions and challenges often arise in practice during implementation. Reliable support and regular software updates are therefore crucial for compliance and smooth operation.

• Regular updates: Is the software regularly updated with new features and adapted to new IFRS 16 regulatory requirements?
• Customer support: Is there fast, competent support available to help with questions or problems?
• Training and documentation: Are training courses, webinars, or comprehensive documentation offered?
• Technical advice: Is a team of experts available to provide technical support for complex issues and, if necessary, to assist with the project?

6. Security & compliance

The security of sensitive financial and contract data is a top priority. The software should meet strict security standards and offer complete traceability of data changes.

• Data security: Does the software meet high security standards (e.g., GDPR, ISO certifications)?
• Audit trail: Are all changes made during data processing logged in a traceable manner?
• Access rights: Can user roles and user rights be controlled in a granular manner?

7. Costs & licensing models

Transparent and fair cost structures facilitate budget planning and help you select IFRS 16 software that makes economic sense. The long-term perspective should also be taken into account.

• Transparent cost structure: How is pricing structured? Are there fixed or usage-based licensing models?
• Additional costs: Are there any costs for updates, support, or training?
• Investment protection: How long can the software be used?

Tips for selecting the right IFRS 16 software

When choosing the right IFRS 16 software, you should consider strategic and practical factors in addition to purely functional aspects. Use the following five tips to find the best provider for your company and make an informed decision for a long-term, sustainable investment.

• Conduct a needs analysis: Clarify internally which requirements are particularly important (e.g., ERP integration, user-friendliness, reporting).
• Weigh up the costs and benefits: Don't just compare prices, but above all, the benefits and long-term savings.
• Use a trial phase and demo: Insist on a trial phase to experience the software in practice.
• Check future viability: Ensure the provider plans updates for future legal requirements.

Successfully select and sustainably implement IFRS 16 software

Selecting the best IFRS 16 software is a key success factor for audit-proof, efficient, and future-proof lease accounting. Clearly defining requirements, comparing providers in a structured manner, and taking into account both regulatory requirements and practical factors such as usability, integration, and support will lay the foundation for a solution that will work in the long term.

Whether you have been working with Excel, want to modernize your processes, or replace existing software, the market offers many options, but not every solution fits the specific requirements of your company. It is particularly important to choose software that not only fully maps current standards such as IFRS 16, but can also keep pace with future developments.