6.1 Register start date and end date of lease payment correctly

The start date and the end date of lease payments are some of the factors that determine your lease’s cash flow, which is one of the main contributors to the lease’s liability. Therefore, it’s important to register the start date of lease payment and the end date of lease payment correctly in our solution, to reflect the real cash flow of the lease contract payments.

6.1.1 Actual lease payment pattern

To register the start- and end date of lease payments correctly, you need find out the actual cash flow pattern for the lease contract. We recommend that you check the lease contract or your recent invoices of the lease payments to find out when and for which period the leases are to be paid. After you have established the payment pattern for a lease, you can register the start- and end date of lease payments accordingly. The payment pattern needs to be correct for reconciliation to invoices and accruals in your accounting records.

6.1.2 Registers cash flow based on a date

The calculation model registers cash flow based on date, frequency and amount, as opposed to direct cash flow registration (i.e. a list of dates and amounts). This makes registering simple and regular cash flows easier. There are, however, certain caveats you must pay attention to when it comes to irregular payments or date choices. The most common of these is that the end date is always inclusive, meaning that if a lease starts on January 1st 2020 and ends on January 1st 2021, the calculation considers this a 1 year and 1 day long lease, not a 1 year lease. The number of payments that occur are based on the number of months in a given payment period, rounded up, and will for a monthly paid lease with these dates result in 13 payments and not 12, as one might expect. If the lease is in fact a 1 year and 1 day lease with 12 payments, one can either register a second payment period to include the final day with a payment of 0, or one can set the depreciation end date to be 1 day later than the end of the lease payments.

6.1.3 Check calculation warnings

To make the calculation work correctly, the application will check start- and end dates and report a warning if the dates are not related. For example, if a contract starts in January and has quarterly lease payments, then the calculation model will show a warning if the end date is in months other than March, June, September or December. The contract will then appear on a warning list and you must enter the correct date for the contract to be in accordance with the payment pattern.

The calculation model also gives a warning when the lease period is a couple of years (and months) and one or two or three days.

You can check the lease payment pattern of each contract listed in the warnings tab. And then, if necessary, you can change the start- or end date of the lease payments in SharePoint to get the correct lease payment pattern.