If you’re a member of the board for a condominium or Homeowners Association (HOA), you probably know better than anyone that August is a common time to start working on budgets. This is an important time of year for these communities—effective planning can provide financial stability and position the community for growth.
To help you navigate this process, we spoke with industry veteran Elizabeth Babin, the Regional Director of Worth Ross Management in Central Texas. We distilled her advice into these top tips that will help you jump into this budgeting season with confidence!
1. Start Early
Babin encourages an early start to the budgeting process, advising boards to review contracts annually before budget season starts. This helps you get the best service for the best price. More importantly, this better prepares you for budgeting since you already know the numbers needed, ensuring that you’re ready to plug and play. Keep this in mind for next year - starting a few weeks earlier gives you more time to prepare accurate data and perfect your plan!
Pro Tip: Babin also recommends that you review your reserve study ahead of budget season to confirm three things: 1) whether an update to the reserve study is necessary (which should be budgeted for), 2) the amount recommended for your reserve contribution in this upcoming fiscal year, and 3) which cap-ex items, per your reserve study, are nearing the end of their remaining useful life.
2. Do Your Market Research
For communities with onsite staff, Babin urges you to do your market research. Complete a wage analysis – both internal and external to ensure you are aligned with market rates and can successfully recruit the team members you need. Your team serves as the heart of the property, so attracting and retaining the best talent possible is crucial to sustaining the community’s well-being and smooth operations.
3. Don’t forget to budget for PTO / BTO / VTO.
If you have onsite staff, don’t overlook budgeting for Paid Time Off (PTO), Bereavement Time Off (BTO), and Volunteer Time Off (VTO) either. Babin says, “Ensure that you’ve accounted for staff coverage and the related expenses during time off. If left unbudgeted, you may face substantial variances due to overtime costs.”
4. Consult with Department Leaders and Your Treasurer
Take advantage of the expertise within your team, as collaboration is key to making budgeting successful. “Remember, you aren’t in this alone,” Babin says. To ensure a comprehensive, well-rounded approach, she recommends meeting with department leaders and your Board of Directors (BOD) Treasurer. “They may remember something that you don’t. Take advantage of the resources you have in front of you to avoid missing something important.”
5. Factor in Potential Bad Debt
If your community struggles with a high delinquency rate (>5%), Babin suggests that you account for bad debt in your budget. This is debt that is considered bad when it’s unlikely that the debtor will pay and settle the amount owed to a creditor. This gives you a more realistic financial snapshot, may help avoid some cash flow issues, and helps prevent unnecessary surprises.
6. Help Homeowners Understand
Remember to maintain clear, effective, and timely communication with your homeowners to avoid any confusion and decrease negative feedback which is, more often than not, a result of misunderstanding and / or poor communication.As fellow members of the community, they are financially impacted and should feel comfortable with the proposed budget numbers. Their contributions in the form of HOA fees or condo dues directly impact the financial health of the community. “It’s really important that we take the time to explain and help homeowners understand,” Babin says.
For pointers on clear communication, check out our blog: Four Tips for Effective Property Management Communication.
Partner with BuildingLink
Trusted by condos, co-ops, HOA’s and multifamily properties around the globe, BuildingLink helps property managers deliver superior resident experiences while streamlining maintenance and operations. We offer tools that will simplify your record-keeping and administration, communications, maintenance, and front desk operations.
When you’re ready for smarter property management, learn more and request a BuildingBoard quote today.