Six Simple Steps to Develop Your Condo Budget
As a condo board member, one of your most important duties is to create the condominium corporation’s annual budget. More than just a set of numbers, your condo budget provides the framework for all of the goals that your board wants to accomplish, which is why it is so critical.
Unfortunately, budgeting is something that many condo boards don’t do as well as they should. Assistance from a quality property management company can go a long way toward ensuring that you have a condo budget that works. Experienced community managers who have worked with a wide range of condo corporations know what it takes to create an effective budget and can apply their in-depth understanding of budgeting best practices to help you meet your objectives.
Here we present six tips to point you in the right direction as you develop your community’s budget.
- Stick to the basics.
No matter what unique qualities your condo corporation may have, your budget framework should consist of four basic elements:
- Objectives and goals. It is common to lose sight of the big picture when you are busy delving into financial details. Remember to keep your eye on your goals so that this doesn’t happen.
- Expected income and expenses. Although this is just an estimate, consider all the money that will come in and go out for your common elements.
- Reserve fund contributions. These contributions will be determined by your reserve fund study and plan. Be sure to contribute exactly what the plan dictates.
- Timeline. Your timeline enables you to deliver your budget so that it can take effect promptly.
- Assemble the documents you need.
Most likely, your condo corporation has created budgets in past years. Even if this is your first budget, much of what you need can be found in monthly records that are readily available. Locating past documents will give you necessary information and enable you to structure your budget. Among the documents you should assemble are:
- Monthly management reports
- Financial statements
- Previous budgets
- Condo corporation documents
- Reserve fund study and plan
- Schedule of delinquent unit owner accounts
- Service contracts
- Your wish list
- Define budget categories and line items.
With your basic elements in mind and your important documents assembled, you now need to organize all your information into budget categories and line items. Although budgets will vary from one community to the next, some of the components your condo budget should include are:
- Administration
- Utilities
- Building maintenance
- Grounds maintenance
- Insurance
- Management and accounting
- Reserve fund contributions
- Security provisions
- Remember other important factors.
As you insert amounts for each of your budget categories and line items in Step 3, consider whether:
- Economic changes in things like utility costs, gas prices, insurance premiums or labor costs will have an impact
- Historical data might provide insights you can use in your current budget
- You want to alter the level of amenities and services you provide to residents
- Any owners provide or create programs (classes, clubs, events, etc.)
If you are not currently working with a condo management company that has a vendor program, check your vendor agreements for potential rate changes. Be sure to budget for capital improvement projects, too, to avoid special assessments.
Familiarize yourself with your condo corporation’s maintenance requirements and associated costs, and plan projects like painting before your structures look run down. Keep in mind that an older property will require more maintenance spending, but no matter how old your structures may be, putting off maintenance can increase costs no matter how old your property may be. A good property management company will be able to help you plan or schedule and budget for predictive maintenance.
- Determine your sources of revenue.
In addition to tracking your spending, examine how you will fund your budget. Establish a payment schedule for receiving dues, and be diligent about taking necessary collection actions to prevent funding gaps.
- Use software that does the job.
Once you have completed steps one through five above, find the best budget-tracking software for your needs. Don’t rely on spreadsheet programs, which will only do basic calculations. A professional condo management company should be able to offer you advanced financial software that includes tools to help in the production and ongoing analysis of budgets.
Follow the tips in this article, and you will be well on your way toward successfully developing your condo corporation’s budget. You may still have a lot of work ahead of you, but you should at least have a better understanding of what you need to do to create positive changes in your community.
Learn how an experienced community management company can help guide you through your budgeting process. Contact FirstService Residential, Alberta’s leading community management company.