Most of us dread budget season! For some, this task feels overwhelming; for others, it requires digging into the weeds too much; for many, they feel boxed in by their boards or residents desire for “no fee increases.” While I don’t love working on budgets, here are some tips that have helped me along the way.
Start with the Easy Stuff
I try to start filling in each new budget with the easiest items which are usually contracts that aren’t escalating or which have a pre-set increase. This allows my brain to get back into “budget planning” mode and it feels helpful to see some quick initial progress.
I then move to areas of the budget that are fairly easy to begin inputting like certain income numbers that might stay the same or which will only increase a little. All of this just helps to get the ball moving for me.
Set Aside Specific Times
For this next phase, I try to follow the adage, “Swallow the frog first.” Meaning… Tackle the think you dread most. The easiest way to do this, for me, has been to set specific times in my day to tackle “x” budget item and limit that ‘appointment’ to 60 or 90 minutes. Thinking of working on a difficult task with no set starting time and no concluding time makes it too easy to feel overwhelmed or to never start the task.
For the most challenging areas, like insurance costs or utility increases, I turn to the professionals for assistance. I work closely with a utility broker and an insurance broker as they know their fields with great expertise.
Finally, I spend a lot of time looking at all the payroll-related costs as these can be a little tricky—especially if your community allows merit-based pay increases. Hopefully, you already have a good handle on how much overtime or holiday pay you need to include as well as the project increase for health benefits.
Don’t forget!
• Make sure you have your community’s most recent financial reports handy to see how your current spending trends are coming along. Did one category get reduced too much and now you’re over-budget?
• If available, review the trends for the previous 3-4 years to get a better sense of how the current year fits into the picture.
• Even though capital expenditures come from separate reserve funds, your community needs to contribute sufficiently to stay ahead of projected major expenses. Do not let your board convince you to lower this annual contribution too much!
• Finally, keep in mind the outliers affected by billing cycles or seasonal expenses. Does one category look artificially high or low? (Some insurance premiums require full payment at the time of renewal while other items don’t get billed until the end of the year.)
Critical Conversations
With everything I’ve stated in mind, the most critical part of this process is the many conversations (and meetings) that should take place with your board treasurer and, if applicable, the finance committee—as well as with your entire board. This is a challenging process of listening to them while advocating for what you know is best for the association. We each must learn to be flexible when possible while also knowing when to stand firm on a particular decision. Always keep in mind the long-term health of the association in your budget discussions!
I would argue that 90% of your potential success in the upcoming fiscal year depends 100% on your diligent preparation of your community’s annual budget. So, swallow the frog and jump into the weeds! The fruit of your labors will become evident in the months (and years) to come!
About the Author
Hernando Herrera, CMCA, AMS, PCAM
Community Manager, Beaver Hill Condominium
FirstService Residential (Philadelphia, PA)
703-675-7415
Member of CAI since 2010 (# 6082834)
