When it comes to condo associations, a budget is a huge deal. If you have incorrect figures, it can be difficult to recover losses in the future. Here’s why keeping your financials in check with the right budget is important.
What is a Budget?
A budget allows you to determine how you will run your association financially from the standpoint of all aspects of your building.
The budget typically includes day-to-day operating expenses, utilities, basic repairs, and income.
Making a budget takes a lot of time to do. You don’t want to hope you have enough income to cover the expenses.
In addition, there will always be repairs, projects, utilities, and all these other things you must account for.
How to Make the Right Budget
What we do is look at three years of records of both your income and your expenses.
For bigger associations, you must refer to five years of records.
From there, you can include the following considerations to achieve the right budget.
1. Use the average as a basis.
We will look at the trends to see if it’s constantly growing and if the cost increases.
The average will give you a ballpark figure of what your expenses are. Then, you can start the budget allocation from there.
2. Factor in the inflation rate
For example, inflation alone gives you 3-5%. We will build the budget from there, including the projected inflation rate.
Even if you don’t know your new policy for insurance, it should build up a bit higher.
3. See where you can save
In addition, we go over the expenses to see which areas we can save money on.
We go line by line when we take over a new property from another property management company. We review where the expenses are and see what we can bring back into line.
4. Assess if you need loans
But for any of our existing condo associations, we sit down with the trustees. We plan for the next year, such as what projects they want to work on.
We review if those are within the budget, such as a new purchase or a painting project. If they aren’t, we assess if we will need some sort of loan to cover the projected expenses.
Why Having the Right Budget is Important
Our actual budget creation happens in almost the last quarter of the year. We sit down and review monthly projections to see what those other expenses are or will be.
Then we propose a budget to the trustees. We want to make sure that we are going to be positive throughout the year when looking at that budget and comparing it against the actuals.
We do not want to run at a negative from the get-go and lose money from your operating account. At the end of the day, we ensure that your current owners pay at the end of the year to bring you back at par.
The Boston HOA Guarantee
If you or anyone else you know is looking for a proactive property manager to help you create the right budget and do more than just tell you what to do but also explain it to you, please think of Boston HOA Management.
