Leasing is a complex process that involves multiple stakeholders, from procurement and finance to legal and tax departments. To streamline these operations, many organizations establish a Center of Excellence (CoE)—a dedicated team specializing in lease accounting and management. But what specific leasing functions should a CoE handle, and how can it enhance efficiency across the organization?

Defining the CoE’s Scope

A leasing CoE doesn’t operate in isolation; its responsibilities depend on company size, portfolio complexity, and internal expertise. Generally, leasing processes fall into two categories: pre- and post-lease closing. The CoE’s involvement in each phase varies, but its overarching goal is ensuring compliance, accuracy, and efficiency.

Pre-Lease Closing: Collaboration is Key

Before finalizing a lease, several critical decisions must be made. Here’s where the CoE plays a pivotal role:

1. Lessor Selection
   While procurement or treasury typically leads lessor negotiations, the CoE contributes valuable insights—especially regarding past performance and service levels. Since the CoE interacts frequently with lessors, it understands contractual nuances that other departments might overlook, such as restrictive end-of-term conditions or unfavorable purchase options.

2. Lease vs. Buy Analysis
   This decision varies widely across organizations. Some CoEs engage early, while others step in only after contracts are signed. Regardless of timing, the CoE ensures consistency in financial modeling, leveraging data from treasury, tax, and procurement teams. By standardizing assumptions and methodologies, the CoE prevents discrepancies in lease evaluations.

3. Contract Management
   Equipment leases, particularly in multinational companies, benefit from centralized oversight. A CoE can standardize contract terms, ensuring compliance and reducing inefficiencies. For real estate, however, dedicated property teams often manage leases independently.

Post-Lease Closing: Enhancing Efficiency

Once a lease is active, the CoE shifts focus to administration and optimization:

1. Portfolio Management
   Managing lease data—ranging from payment schedules to asset tracking—requires specialized skills. A centralized CoE ensures accurate financial reporting and compliance with accounting standards (e.g., IFRS 16, ASC 842). It also reconciles subledger and general ledger entries, minimizing errors.

2. Handling Lease Modifications
   Amendments, buyouts, or early terminations can be complex. The CoE streamlines these processes using automated tools, reducing manual effort and errors.

3. User Support & Training
   A CoE often serves as an internal helpdesk, addressing queries from other departments, managing system access, and troubleshooting issues. This support ensures smooth adoption of lease management software across the organization.

The Future of Lease CoEs: AI & Automation

As technology evolves, so does the CoE’s role. Artificial intelligence (AI) and automation are poised to revolutionize lease management:

• Generative AI can improve cross-departmental communication, reducing delays in approvals and data sharing.

• Predictive analytics may help identify cost-saving opportunities, such as renegotiating unfavorable lease terms or optimizing asset utilization.

• Automated reconciliations will free up CoE teams to focus on strategic initiatives rather than repetitive tasks.

Rather than replacing human expertise, AI will augment the CoE’s ability to deliver value—transforming it from a compliance-focused unit into a strategic partner.

Final Thoughts

A well-structured CoE enhances lease management by centralizing expertise, improving data accuracy, and driving efficiency. While its responsibilities may vary by organization, its core mission remains the same: ensuring leasing processes align with business goals while minimizing risks and costs.

Is your company leveraging a CoE effectively? If not, now might be the perfect time to explore how it can optimize your leasing strategy.