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What Are The Special Benefits Of Software Leasing?
From the viewpoint of the user, it is just about the same
as equipment leasing, except it's for an intangible, the
software and the software license. It is a method of
paying for software over time instead of a single
upfront payment and the functional equivalent of a
loan from the leasing company or the software developer.
It is normally structured as a capital lease rather
than an operating lease. However, it is
often accounted for as an operating lease.
Obtain all the licenses that are needed now to supply all users.
You have funds allocated in your budget for only some
of the licenses you need. You can arrange a lease for
all the licenses you need and still be within
your annual budget requirements.
Include consulting, hardware, customization, and training costs in the lease.
Bundling the individual components of a project in one lease
is normally simpler and tends to result in level expensing
rather than having some components expensed
upfront before benefits are realized.
Include internal implementation costs in the lease where appropriate.
You're doing some of the work, like data conversion.
These costs also be included in the lease.
You can own the license at the end of the lease without additional payment.
In fact, unless you clearly have only a short-term
need for the software, you should only execute a finance
lease where there are no additional payments at the
end of the lease. We think the value of software at
the end of the lease is in most cases close to, if
not greater, than the value at the beginning. Thus,
an operating lease with an option to purchase at fair
market value option at the end of the lease will in
almost all cases turn out to an expensive proposition..
Correct the failure of many accounting systems to
recognize the long-term benefits of software and related costs.
A lease will in most cases permit you to
better match software expenses with the period of benefit.
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