Most companies start their lease accounting journey in Excel. A few leases, a well-structured workbook, and carefully built amortisation schedules may be adequate. It works, at least for a while…
But for others, spreadsheets quietly become a liability. The portfolio grows, lease changes accumulate, modification requirements become more frequent, disclosure season turns into a scramble, and the person who built the original model leaves the company.
The question is not whether spreadsheets can handle lease accounting. They most likely can. The real question is whether they should, given your specific circumstances.
We provide lease accounting software, so naturally we have a point of view. But we would rather be clear: if spreadsheets genuinely work for you and remain manageable, they remain a valid option. Software should only be introduced when the value it adds outweighs the associated costs and the risks of continuing without it.
This article will help you determine which camp you fall into.
When Spreadsheets Work Fine
Spreadsheets are a perfectly reasonable tool for lease accounting when the portfolio size and complexity are manageable. If most of the following describe your situation, you probably do not need dedicated software (for now):
- Fewer than 5 leases, all straightforward: fixed payments, no mid-term modifications, no CPI-linked escalations
- Single accounting standard, single entity: you are reporting under one framework and do not need to reconcile across subsidiaries or standards
- One person manages everything and has strong Excel skills. They built the workbook, they understand the formulas, and they are not leaving any time soon
- Your auditor is comfortable reviewing spreadsheet workings and has not raised concerns about the approach
Tip: Even if spreadsheets work for you, invest time in structure. Keep inputs, calculations, and outputs on separate sheets. Document your methodology and assumptions. A well-built spreadsheet is far more resilient than a clever one.
If this sounds like your situation, stop reading and go back to your spreadsheet. There is nothing wrong with maintaining a good Excel sheet that works.
The Warning Signs
The shift from "spreadsheets work fine" to "spreadsheets are a problem" is rarely dramatic. It usually happens gradually, one lease modification or one additional user at a time.
Here are five signs that you have outgrown your current approach:
1. Version control chaos
Multiple copies of the lease workbook exist across shared drives, email attachments, and local desktops. Nobody is entirely sure which version is current. File names like Lease_Schedule_Final_v3_ACTUAL_final.xlsx float around. When two people make changes to different copies, reconciling them becomes time-consuming and error-prone.
2. Formula errors nobody catches
Complex nested formulas work perfectly until someone inserts a row, changes a cell reference, or copies a formula without adjusting it properly. Spreadsheets have no built-in validation for lease accounting logic. A broken range reference or a hardcoded value buried in a formula chain can silently produce incorrect numbers for months before anyone notices.
3. No audit trail
Your auditor asks, "Who changed this value and when?" and there is no clear answer. Spreadsheets do not track changes meaningfully. You might know the file was last saved by someone, but you cannot trace which cells were modified, what their previous values were, or why the changes were made. This is not just an inconvenience; it's an audit risk.
4. Modifications take hours
A lease extension, a rent review, or a change in the lease term requires manually rebuilding the amortisation schedule. For a single lease, this might take 30 minutes. But if you have 50 leases and 10 modifications a year, that quickly adds up to several days of skilled finance time that could be used elsewhere. Worse, each manual rebuild is an opportunity for error and increases the risk of misstatement.
5. Disclosures are a nightmare
Building the maturity analysis, the right-of-use asset roll-forward, the lease liability reconciliation, and the expense breakdown from scratch every quarter is tedious and error-prone. If your disclosure preparation takes longer than the underlying accounting, something is wrong.
If two or more of these points sound familiar, it is worth evaluating your options.
The Decision Framework
Rather than the one-or-the-other "spreadsheet or software" choice, think of it as a spectrum based on portfolio size and complexity:
Under 5 simple leases
Stick with spreadsheets. Invest in a well-structured template with clear inputs, automated calculations, and a separate disclosure output tab. Document your methodology so someone else can pick it up if needed. The cost and effort of implementing software is unlikely to pay back for a portfolio this small.
5 to 50 leases, or any complexity
Evaluate software. Once you have modifications, CPI-linked escalations, multiple reporting entities, subleases, or multi-standard requirements, the maintenance burden on spreadsheets increases sharply. The time saved on modifications and disclosure generation alone often justifies the investment. Run the numbers on your own situation: how many hours per quarter do you spend on lease accounting tasks that software would automate?
Over 50 leases
You almost certainly need software. At this scale, the risk of undetected errors, the audit overhead of reviewing spreadsheet workings, and the ongoing maintenance make spreadsheets unsustainable. A single formula error across 50 leases can result in a material misstatement that is difficult to identify and painful to correct.
Quick comparison of how spreadsheets and dedicated software differ in practice:
| Factor | Spreadsheet | Lease Accounting Software |
|---|---|---|
| Setup cost | Low (your time) | Moderate (implementation + data migration) |
| Ongoing cost | Free (but hidden labour cost) | Subscription fee |
| Modification handling | Manual rebuild each time | Automated recalculation |
| Disclosure generation | Manual, error-prone | Automated, audit-ready |
| Audit trail | None or minimal | Full change history |
| Scalability | Degrades with volume | Handles growth easily |
| Error risk | Increases with complexity | Controlled by built-in validation |
The Cloud Advantage
If you do decide to switch, cloud-based lease accounting software has clear advantages over desktop or on-premise alternatives. Your team can access the system from anywhere, which is especially important as finance teams are no longer confined to a single office or location. There is no IT infrastructure to manage, no server maintenance, no manual software updates, and no dependency on internal IT to keep the system running.
When accounting standards are amended or clarified, cloud software can be updated centrally. You do not need to download a patch or worry about whether everyone is running the same version. The calculations remain aligned with the latest requirements without manual intervention.
Collaboration is also simpler. Multiple team members can work on different leases simultaneously without the version control problems that plague shared spreadsheets. Every change is logged, so you always know who did what and when, providing full visibility and accountability across the process.
Finally, cloud platforms handle backups and disaster recovery as standard. Your lease data is no longer exposed to the risks of local storage or shared drives. For financial reporting, this creates a more secure and controlled environment.
Making the Switch
If you have decided it is time to move to software, the migration is less painful than most people expect. Start by exporting your current lease data into a clean format: lease terms, payment schedules, commencement dates, and any modification history. Most software providers will help with data mapping.
Run the old spreadsheet and the new software in parallel for at least one reporting period. Compare the outputs line by line. This gives you confidence in the new system and provides a clear audit trail for the transition. Once you are comfortable, move over fully.
The key is not waiting until the pressure is unbearable. The best time to switch is during a quieter period, when the transition can be managed properly, rather than under month-end pressure.
If you are considering making the switch, it is worth seeing how dedicated lease accounting software handles modifications, disclosures, and multi-entity reporting in practice. Book a demo to see it in practice.
The goal is not to replace spreadsheets for the sake of it, but to move when the scale, complexity, and risk make it the better decision.
