NetLease - Month End Playbook

Use Case 

It is easy to miss steps when going through your month end processes. We have provided the checklist below as a baseline of what to check and do regarding your leases to close your books every month.

Month End Playbook

Optional Step: Confirm your bundle is up-to-date.

1. Verify all leases are accounted for in the system. Specifically look at any Pending leases to verify they should not be active in the current month.
   1. We recommend reviewing this by navigating to NetLease > Lease Management > Lease List. Change the view to the "Netgain Preferred Lease List". You are then able to filter and can filter by the "Pending" status.
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   2. If any leases need to be started in the current month, you will need to generate schedules for all new leases. See our guide on how to mass generate schedules. 
   3. Commence new leases. See our guide on how to commence leases for more detail.
2. Verify all modifications to leases for the month are processed. If any leases need to be modified, see our guide on how to modify leases.
   1. We recommend reviewing this using the lease modification report.
3.  Verify any leases that are ending early have been terminated. If any leases need to be terminated, see our guide on how to terminate leases.
   1. We recommend reviewing this using the early termination report.
4.  Verify all leases that are at term end are closed out. These leases will have a Complete status. If the leases need to be closed out in the current month, they will have the status Pending Close Out.
   1. You can see which leases have reached the end of their lease in the month and need to be closed by navigating to NetLease > Mass Update Leases > Mass Close Out Leases. 
   2. All leases with status "Pending Close Out" will be listed. Choose the Effective Date you want the leases to be closed on. Select leases you want to close and press Close Out. 
   3. For more detailed instructions, see our guide to mass close out leases.
5. Run the monthly journal entries for the month. A detailed explanation is found in our guide for running monthly journals.
   1. Navigate to NetLease > Process Monthly Transactions > Monthly Lease Journals.
   2. Verify the Period is the current month. Check the box "RUN ALL MONTHS UP TO AND INCLUDING" if you want to run journal entries for all previous months (in case prior months have been missed) as well as the current month. If journals have already been run in previous periods, this will not affect those journal entries.
   3. Select Mark All to select all leases with a payment in the selected period.
   4. Press Generate Transactions. View full size
      

6.  Run the monthly short term journal entries if applicable. A reversing journal entry is recorded for each lease, this entry reclassifies the short-term portion of the lease liability from long-term to the pre-defined short-term lease liability account. Note that this functionality is not supported/applicable to for ASC 840, Short Term, or Low Value leases. See our guide on how to book short-term reclass journal entries.

7.  Reconcile clearing accounts. Verify any balance in the clearing accounts are appropriate and expected. We recommend using the following reports to review the month-end balances in your clearing accounts:

1. Lease Payable Clearing Reconciliation. This report shows lease payment activity by lease. This activity should net out to zero for each month if the correct payments are made and NetLease schedules are correct. 
   • Valid Difference: You may have a balance in the lease payable clearing account due to timing differences with payments. Prepayments for leases will remain in the clearing account until the period when the payment is due.
2. ROU Clearing Reconciliation.This report shows initial direct costs, prepayments, and incentives prior to commencement, as well as amounts receivable upon termination of a lease. This activity should net out to zero upon the initial balance entry after lease commencement. 
   • Valid Difference: You may have a balance in the ROU clearing account due to timing differences with payments and lease commencement. Booked initial direct costs, lease incentives, or lease prepayments will cause a standing balance in the ROU clearing account until the lease is commenced.

8.  Reconcile all lease activity. The subledger needs to tie to the general ledger (GL) at the end of every period. We recommend using the following reports to tie out the Lease Liability, ROU Asset, and Lease Expense:

1. Lease Liability GL to NetLease Reconciliation. This report shows the sum of all lease liability transactions per the GL and NetLease Subledger by lease. The balances from the "Lease Liability (Contract or Base Currency)" and "Lease Liability (Subledger)" columns should tie to each other. This ensures all expected transactions and balances per the subledger have been properly reflected in the GL. 
2. ROU Accumulated GL to NetLease Reconciliation. This report shows the accumulated amortization for the right of use asset per lease. The balances from the "ROU Accum. per GL" columns should tie to the "ROU Accum. per Subledger" column. This ensures all expected transactions and balances per the subledger have been properly reflected in the GL. 
3. ROU Gross GL to NetLease Reconciliation. This report shows the gross accumulates amortization for the right of use asset per lease. The balances from the "ROU Gross Asset per GL" columns should tie to the "Gross ROU per Subledger" column. This ensures all expected transactions and balances per the subledger have been properly reflected in the GL.

9. Run disclosure reports. We recommend using the following reports to gather necessary disclosure information:

1. Undiscounted Lease Maturity Waterfall. This report summarizes future payments. It is helpful to reconcile the lease liability and provides the reconciliation in a disclosure format.
2. Components of Lease Costs & Impairments Report. This report summarizes lease costs by lease types.
3. Supplemental Balance Sheet Information. This report summarizes lease balances by lease types.
4. Supplemental Cash Flow Information. This report summarizes cash flow information by lease types.
5. Weighted Average Rate Summary. This report provides a summary calculation of weighted average rate (for single currencies only).
6. Weighted Average Term Summary. This report provides a summary calculation of weighted average term (for single currencies only).