Budgeting season feels like a whirlwind of numbers and variables that you need to sort like an impossible jigsaw puzzle. Frankly, creating a budget can feel overwhelming but that doesn’t mean it has to be. If you’re already dreading the onset of budgeting season, here are a few strategies to make the whole affair more manageable
Just because budgeting can be daunting, doesn’t mean you should leave it until the last minute. You’ve got to take time, early on to make sure you have accurate data on hand. l Before you start consider market conditions, trends and forecasts. After all, these things will inevitably impact your bottom line and your return on investment. Set aside time in advance to do the appropriate research (or delegate it to someone else) so that when it comes time to get down to the nitty gritty of banging out your budget, you’ll already have all your ducks in a row.
Have Clear Goals
It’s integral to start your process with a clear goal in mind. The best way to conquer any overwhelming task is to start with a clear intention of what you want to accomplish. Make sure you have realistic expectations of where you see your company where the money is going to come from. For best results, we recommend using written guidelines, including checklists of what’s expected and details about the budgeting model.
Being able to project losses, gains, and year-over-year growth prior to budgeting will help you gain a realistic picture of your YOY performance. Starting off with accurate data means you’ll be explaining variances in the coming year. Forecasting may seem challenging, but if you do your research on what has past, it’ll be easier to predict what’s to come. Some challenging but important things to forecast for you budget include: vacancy, end-of-year and effective rents, bad debt, concessions, loss to lease, and expenses. The more accurate your research, the more accurate your forecasts will be.
Have a Walk Through
As a property manager, you’re responsible for so many things – big and small- that it’s very easy to overlook the details. Especially, if you’re on the front line, day in day out, you deal with so many things it’s difficult to balance what needs attention, and what’s going to take priority. That’s why we recommend having a walk through your properties before budgeting capital, including: interiors, exteriors, common areas, signage, and anything else you are responsible for. A visit at night can also help identify any potential safety risks that may need to be addressed.
Be honest and specific
Adding thorough and honest commentary to your budget during the process can help tremendously, especially when it comes to time sell the plan to owners. Avoid vague statements, such as “based on historical trends,” and instead include specific data and numbers. For instance, don’t just state that the payroll increased by 20%. Explain that it was due to staff shortages. Commentary like this will reduce review time and shorten the budget process.
At the end of the day, budgeting is a skill and property managers who invest their time in developing and honing that skill will ultimately find the process gets easier and less stressful with each passing year.