Most of Us Dread Budget Season!
For some, this task feels overwhelming. For others, it requires digging into the weeds too much. And for many, they feel boxed in by their board 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 that 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 only increase slightly. All of this helps get the ball rolling.
Set Aside Specific Times
For the next phase, I try to follow the adage, “Swallow the frog first.” In other words, tackle the thing you dread most.
The easiest way to do this, for me, has been to set specific times during my day to work on a particular budget item and limit that appointment to 60 or 90 minutes. Thinking about a difficult task with no defined start or end time makes it much easier to feel overwhelmed—or to avoid starting altogether.
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 because they know their fields with great expertise.
Finally, I spend a lot of time reviewing 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 projected increase for health benefits.
Don’t Forget!
- Make sure you have your community’s most recent financial reports handy so you can see how your current spending trends are progressing. Did one category get reduced too much and now you’re over budget?
- If available, review trends from the previous three to four years to better understand how the current year fits into the bigger picture.
- Even though capital expenditures come from separate reserve funds, your community needs to contribute enough each year to stay ahead of projected major expenses. Don’t let your board convince you to reduce this annual contribution too much.
- Keep an eye out for outliers caused by billing cycles or seasonal expenses. Does one category appear artificially high or low? Some insurance premiums require full payment at renewal, while other expenses may not be billed until the end of the year.
Critical Conversations
With everything I’ve stated in mind, the most important 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 that requires listening to their perspectives while also advocating for what you know is best for the association. We each need to learn when to be flexible and when to stand firm on decisions that protect the community’s long-term financial health.
Always keep the long-term success of the association at the center of your budget discussions.
I would argue that 90% of your potential success in the upcoming fiscal year depends on the diligent preparation of your community’s annual budget. So, swallow the frog and jump into the weeds! The fruits of your labor 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)
Phone: 703-675-7415
CAI Member Since: 2010 (Member #6082834)
