How To Help Your Clients Prepare Their Upcoming Budgets
It may be time for your Association clients to start preparing their budgets. Given these inflationary times, it’s important to prepare a well thought out budget and to help prepare your Associations for cost increases and other changes in the upcoming year. Here are some tips to assist property managers to help Associations in preparing these budgets.
Maintenance Expenses
Don’t just do what you did last year, or years before. Take the time to shop the current cost of maintaining your Association’s community. Some maintenance items persist throughout the year, and others are seasonal. Make a list of all of the expense items that have come up in the past few years and any anticipated changes. Consider these items:
Does the community have a need for snow removal?
Do you have a cable or telecommunications contract up for renewal?
Is it time to review the landscaping contract?
Is there a pool that needs maintenance?
Financial Partners
It’s also time to review relationships and contracts with your Association’s financial partners. For instance, even though it’s not mandatory to investigate alternative advisors, it’s prudent to ensure your Association is getting the most value out of these relationships. Think about these questions:
Has your Association’s insurance agent been contacted regarding estimating insurance premium increases? Was a buffer included, given the extraordinary increases in insurance premiums lately? Better to plan upfront instead of just dealing with the shortfall down the road. These sort of discussions with your Associations will probably be unpopular, but your Associations will appreciate your foresight down the road.
Has your Association’s accountant increased its fees? Is that accountant actually adding value to your Association? It may be time to discuss the Association’s current accounting needs.
When’s the last time your Association’s bank statements were reviewed for any fee changes? Different banks charge different fees for different products. This is another item that should be shopped around.
After reviewing these items, it may be time to put out a request for a proposal to include current vendors as well as new potential vendors.
Revisiting Reserves
In my experience this is one area where almost all Associations fall short. Associations need their property managers to push the Associations to prepare reserve studies and reserve the necessary funds (at least with respect to those Associations that have substantial common elements; particularly Condo Associations). This is another area where initially you’re going to be unpopular. But those Associations will end up appreciating your foresight.
Review the most recent reserve study with your Association. It should be no more than 3 years old. You want to ensure that the level of contributions required to keep your Association’s reserves are on track.
Expenses
After this review has been completed, there’ll be hard numbers to work with to complete the other operating expense lines in the budget. For instance:
Is there an allowance for delinquent accounts? If not, does your Association’s collection rates indicate a need for one?
Should your Association consider a contingency line item to cover any unanticipated cost increases? They may be unanticipated, but it’s guaranteed they’ll happen.
Income
After you’ve mapped this out, figure out if your Association’s current income is sufficient. With inflation, there will be cost increases, and that’s going to tell you that you need to recommend an increase in assessments. Again, this will be unpopular. Include any reliable “other income”, such as late fees, clubhouse rentals, cell tower rentals, etc.
Now it’s time to finalize the proposed budget. Be sure to include the previous year’s approved budget for comparison purposes, and clearly show any changes. Include footnotes with a brief explanation of any significant changes. When you go to your budget meeting, be sure to bring all supporting documentation, including requests for proposals, the reserve study, quotes, etc.
It’s important to distribute a draft budget ahead of time and to field questions and constructive feedback, which makes for a streamlined budget meeting. Although this is a lot of work, doing these things will make your client Associations appreciate you and want to keep you as their property manager.
Also, you should join my Facebook Group. And you should tell all of your Association clients to take a look at it and hopefully join. There’s a lot of very helpful information there about many topics of great interest to all HOAs and Condo Associations. This site gives you access to all of these Associations. My Facebook Group is called:
OMAHA HOA AND CONDO ASSOCIATION
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