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Reading Between The Clauses

If you think you are making out like a bandit on that lease, it's time to re-read the contract. After all, the leasing company is making money, isn't it?

By John Labate | Updated on March 01, 2006

When it comes to identifying areas prime for cost cutting, equipment lease accounting arrangements are pretty far down most CFOs’ lists. For many companies, especially those not in manufacturing, leasing revolves around dozens of agreements spanning many thousands of pieces of equipment, such as personal computers and telephones. For others, it involves a fewer number of large pieces, such as transportation vehicles and equipment. On the surface, even when taken together, these transactions may be relatively small when compared to other line items. But such conventional thinking didn’t stop Dave Huber, vice president of financial planning and analysis at Horizon Healthcare Services Inc., from taking a closer look at the $5.5 billion not-for-profit insurance provider’s leasing processes soon after he joined the company. “The way we evaluated leases was overly simplistic, making decisions based just on interest rates,” says Huber, who explains that most of the company’s leasing was for servers, PCs and laptops used by Horizon’s 4,500 employees. “My intuition told me we weren’t doing this as efficiently as we could be. People didn’t realize we had a problem.”

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