Pull Up Those Boot Straps—Planning Your Property’s Budget
Budget. For some, it should be considered a 4-letter word. Others, who have a strong property management team in place, embrace the budget season and are excited to see what can happen next for revenue growth for their investments. Our clients are excited for September—football, foliage and budgets. Bring on the Fall!
Budgets should be ambitious but realistic. Our team works with our clients to determine goals, assess possible threats, and explore possible revenue generating opportunities.
So what are the crucial strategies when preparing a budget? How can you use past financial data to inform your assumptions? And how can you ensure your budget will help you meet your strategic goals?
Here is how we handle budget planning for our clients:
Budget planning is a routine task that should be considered and tracked all year. Formal budget processing should begin as the summer comes to an end or at least five months before the close of any fiscal year. The following steps and timelines should be taken to ensure a thorough and best possible scenarios for your budget.
- At the closing of each month, expenses should be reforecasted for the remainder of the year. Any expenses not used for special projects should either be rescheduled for a future month or documented and planned for during the following year’s budget.
- Service contracts need to be reviewed, renegotiated, renewed and/or assigned to a new vendor at least 30 days prior to it’s termination.
- All service agreements should be tracked in order to begin this process at least 60 days in advance, ensuring that your Property Manager has ample time to renegotiate and have an agreement in place before the 30 day termination period.
- Building inspections should be completed in quarterly in each calendar year. The last two inspections of the year should focus on progress of projects, determining whether the budget will still allow for completion in the current year or if it should be reallocated for the following year.
- Your property Manager should have budget pricing for any future projects before the close of the third quarter.
By the closing of the third quarter:
- Routine expense estimates should be known and allocated during this time.
- All potential revenue should be evaluated and identified for entry.
The Final Touches
- Actual expenses with a current year reforecast should be compared and provided to show part of the overall health and performance of your building.
- Your Property Manager should be engaging with leasing teams to ensure that all potential new lease terms are captured and up to date.
- Operating Expense/RET estimates and current year anticipated true ups should now be complete.
- You should receive your budget draft for review with no less than 1 month before the close of the year.