Planning Your Community Budget: Essential Tips for Success
Creating a community budget is pivotal for setting your board’s initiatives into motion. It's not just about numbers; it's the backbone of achieving the community's goals, making it essential for success.
However, many boards often struggle when it comes to formulating and managing their community budgets.
That's where expert property management firms step in. Seasoned property managers possess the know-how, having crafted numerous budgets and mastered the best practices to help your community reach its targets. Here are six fundamental tips to get you started on your community budget journey.
Remember GERT
Though it may sound unusual, GERT is easy to remember and encapsulates everything necessary for crafting a successful community budget:
- Goals and objectives of your association
- Estimated common element expenses and income
- Reserves you’ve calculated
- Timeline for your budget
These elements form the foundation of your budget planning. Keeping the association’s goals in focus helps maintain perspective while delving into details. Estimated expenses and income provide a crucial numerical base. Reserves act as a financial cushion. The timeline ensures timely budget implementation.
Gather Materials
It's unlikely that this is the first budget your association has prepared. If it is, rely on documented monthly records as a starting point. Access past documents that will shape your budget, such as:
- Previous budgets
- Financial statements
- Monthly management reports
- Reserve studies
- Association documents
- Delinquent unit owner account schedules
- Service contracts
- Wishlist items
Define and Populate the Essential Budgetary Sections
With your GERT identified and crucial background materials in hand, it's time to distill this information into the core sections of the community budget. While each budget is unique, it typically includes the following sections:
Operating Budget
- Estimated common expenses
- Expenses for unit owners
- Administration
- Insurance
- Management fees
- Maintenance
- Security provisions
- "Other" expenses (specific to your community, like hurricane preparation)
- Landscaping
- Provision for bad debts
The Reserve budget, for projects like:
- Roof replacement
- Building painting
- Pavement resurfacing
- Capital expenditures over $10,000
Keep These Considerations in Mind
When populating budget sections with numbers, consider the level of service and amenities you aim to offer residents. Examine any owner-designed programs, such as educational activities, clubs, or events. Historical data can guide budgeting for the coming year. Assess economic factors like gas prices, shifting utility costs, labor variations, and insurance. Benchmark maintenance fees against similar properties that offer comparable services and amenities.
Furthermore, review vendor contracts to anticipate any rate changes. Allocate funds for capital projects to avoid special assessments. Consult association documents to understand maintenance requirements and associated costs. Preemptive upkeep (like painting) is wise, and remember that older properties incur higher maintenance expenses. Delaying maintenance only escalates costs.
Know Where the Money’s Coming From
A community budget isn't merely about outgoing funds; it's also about incoming resources. Understand your budget’s funding sources. In addition to owner assessments, income can come from rent, interest, and other avenues. Establish a payment schedule to avoid funding shortfalls.
Use the Right Tools
With a solid approach, parameters in place, necessary information, and a framework established, use financial software to track your budget. While basic spreadsheet programs like Excel and Numbers offer foundational tools, professional property management firms often deploy advanced systems for budget creation and ongoing analysis.
With these elements in place, you’re on your way to crafting a comprehensive community budget. Although it requires effort, the mystery is now gone. A reliable property management company can assist through these steps and beyond.
