Maximizing the Value of Equipment Leasing

An effective leasing strategy requires the right combination of software and business processes.

Roger Heins knows just how chaotic lease management can be. The assistant treasurer for Allegheny Technologies Inc., a Pittsburgh-based manufacturer of stainless steels and other specialty alloys, checks off a list of challenges companies face in this area: Review processes for new leases can take weeks. Individual business units that negotiate their own leasing deals often agree to terms that are completely different from those received by other divisions within the organization. And finance sometimes has no idea what the company is leasing enterprisewide.

"Most companies struggle to manage various assets, and leased assets magnify the challenges," observes Tom Ryan, Chicago-based vice president of value chain research with the Aberdeen Group, an industry analysis and consulting firm.

It's no small issue. According to the U.S. Department of Commerce, nearly one-third of the $883 billion worth of equipment companies acquire annually is obtained through leasing agreements. Over the last decade, the dollar value of corporations' equipment leases has doubled as businesses have sought to enhance operational flexibility; improve liquidity; transfer asset-related risks, such as technology obsolescence; and reap tax benefits by keeping assets off the balance sheet.

When it comes to asset management, Heins believes, it's best to run a tight ship. So in May of this year, Allegheny Technologies implemented a capital expenditure finance management system from Captara (formerly PureMarkets) that enables it to track leases on hundreds of items -- including trucks, phone systems, IT assets and manufacturing equipment -- in the company's facilities throughout the United States. "Today, we know what leased assets we have," Heins reports. "We're in a far better position to make good decisions and manage the resources effectively."

Allegheny Technologies is hardly alone. More and more organizations are discovering that a bit of visibility into leasing agreements goes a long way toward improving financial and operational results. "It's all about managing documents and grabbing control of processes," says Terry Nystrom, senior vice president of San Francisco-based Captara Corp.

Developing a focused leasing strategy is essential. "Without a strategy in place, companies are at financial and legal risk -- particularly in regard to Sarbanes-Oxley," notes Ryan. Businesses that adopt a well-conceived leasing strategy can trim costs, improve service levels and reduce their administrative burden.