Keeping Your Budget Healthy in the Age of COVID-19
As you begin to work on next year’s budget, it’s important to look for ways to save your association money to offset those unplanned expenses and potential revenue shortfalls. You know how important your budget is, what it means to the future of your association. You know that your fiduciary responsibility is one of the most important commitments you make to your fellow homeowners and you also know that the last thing you want to do right now is raise dues for those homeowners. You may be able to enhance value and save money on budget items you never considered, and your professional property management company can help! In some cases, that may mean getting greater value for your money, rather than seeing an instant savings. The right management partner will have a depth of resources and buying power to help you make the most of your association budget now, for savings down the road. What are some of those areas?
Vendors and Benchmarking
Do you review your vendor contracts on a regular basis or just let them renew automatically? Does your management company? More than 57% of board members said they are not sure if their management companies take this important step, but this is not the time to take a “set it and forget it” approach. Reviewing your contracts may reveal places you can save money. Or it may show opportunities for your association to get more for the same dollars, perhaps saving elsewhere, by extending your existing contracts at a better value or using the buying power of your management company to save on vendors.
Christian Mora is the national director of procurement for FirstService Residential. “We help associations find or save money, or alternatively, provide additional value,” he says. “Our accounting and management professionals will conduct a line-by-line review of your financials, vendor contracts, utilities and operations to identify areas where you can receive better pricing and service from your third-party suppliers.”
Benchmarking, or comparing what communities of similar size and type spend on a number of services, is a powerful tool that tells communities where they stand relative to their peers. Accurate benchmarking of communities and high-rise buildings can only be accomplished by a professional management company of the size which allows access to numerous communities to track such data.
How does benchmarking help your board save money? Imagine an expert sitting down and looking at your landscaping contract in the context of other communities or buildings in your area. She realizes that, compared to other properties of your size and type, you are paying 15% more for your landscaping. She then looks more closely at your landscaping contract, line by line. Are you paying for more higher-end services than you need? For unnecessary services? Or just being overcharged? That information gives your board and management the leverage to go to that contractor and negotiate better pricing or added services to deliver greater value to your board and community.
“It’s amazing how an association can get used to paying for something. Sometimes, all it takes is a phone call to a vendor to see what pricing models they offer to get a better deal,” explains Kevin Adam, COO/CFO at FirstService Residential. “Contracts need to be evaluated annually so you don’t pay more than you need to.” The right management partner will help you do this annually and look for places to increase service value to your community or save money. That’s good advice at any time, but especially during and after the coronavirus pandemic.
A company with the depth of resources to help you negotiate with vendors may also be able to help your association procure items like hard-to-find disinfectants and personal protective equipment (PPE) at better prices and in shorter time than if you tried to source them yourself. “When the COVID-19 crisis started, disinfectants were in short supply. We were checking with our suppliers every single day, sourcing for our various markets,” recalls Adam. “At the same time, our partner vendors were keeping us up to date about the status of the supply chain and product availability. Ultimately, that effort and network allowed us to get needed supplies before others could.”
Insurance and Investments
Where and how is your reserve fund invested? IS your reserve fund invested? More than 50% of board members tell us that they are not confident they are getting the best returns on their reserve fund investments. Make sure your money is working as hard as it can for your association. “Through our extensive banking relationships, we are able to offer our associations better rates of return on investments and reduced fees,” says John Lee, vice president of FirstService Financial, the banking and insurance affiliate of FirstService Residential. “We understand how important it is for associations to have investments that are both safe and yield the highest return possible. Reallocation of funds can generate thousands of dollars in returns each year.”
When did you last have your insurance audited? Are you covered correctly? Having the right insurance doesn’t just mean getting the lowest premium. Low premiums often come with high deductibles or risky exclusions. It may be in your best interest to pay a little more each month and be better covered in the event of a disaster. Don’t set your policies to auto-renew! Every year, work with your broker or agent to assess your coverage and make sure that it is up to date and adequate as well as the best price you can get.
Again, Lee asserts that the depth of resources of FirstService Financial can help FirstService Residential clients get the most for their insurance dollars. “Too many people think saving on insurance means getting the lowest premium, but a lot more goes into it than that,” he says. “It’s important to take time every year to make sure you have the right coverage. If something happens, a cheap policy will cost you more than you bargained for.”
How much energy does your association use in common areas? Are the lights on when no one is using a space? Is your pool or hot tub a few degrees too warm? Are you using the most efficient pool heater for your location and type of property? Is the air conditioning a few degrees too cool? Do your parking garage fans stay on when not needed? Are there areas of your community with excessive outdoor or landscape lighting? All of these are potential places to increase value and save money for your high-rise building or HOA. Your professional management company should have the depth of resources and buying power to work with your local utility company, audit your building or community’s energy usage and find ways to help your community get the most for the dollars you spend on energy.
The COVID-19 pandemic is affecting the economy in ways that will be felt for a long time to come. Working with the right professional management partner can help your association stay on sound financial footing, getting the greatest value for your association’s dollars. To learn more, download our guide to budgeting during and after crisis today.
This document is a compilation of proposed categories for residential communities to consider when searching for potential savings in their budgets. Nothing in this document should be construed as a promise or guarantee of the amount of savings, if any, of any particular community. Our comments about potential savings opportunities are expressions of opinion only. This document is not intended to and must not be construed as or relied upon as, providing medical or legal advice of any kind on any issue. These categories may change from time to time as federal, state, or local authorities issue new and/or revised directives.