Maintaining Your Budget in the Era of Social Distancing
The COVID-19 pandemic is creating financial impacts that we won’t fully understand for a long time. At the same time that your associations’ residents may have difficulty making their assessment payments, your board may have to put more resources towards sanitation efforts to ensure your community's residents stay healthy -- all while keeping your budget in check.
As you start to build out your budget for 2021, it’s critical to look for ways to make the most out of your resources and plan for any potential obstacles that can cut into your budget. You understand how your budget impacts your residents’ experience and overall financial health of your community and have a firm grasp on your financial responsibility and what that means for the best interests of your residents. The last thing you want to do (especially in times of crisis) is put pressure on your residents by raising their dues. It’s possible for you to enhance value, while simultaneously saving money on budget items you may have not considered, by enlisting the right property management company to support your mission of providing an exceptional experience for your residents (even during turbulent times). Choosing the right property management partner will provide you with a depth of resources and buying power to help you maximize your association budget, both in the short and long-term.
Let’s review some of those areas:
Compare Vendor Costs Using Benchmarking
Are you or your management company actively reviewing contracts with vendors, or do you just let them automatically renew? This can be one of the easiest ways for your association to save money, in fact, more than 57% of board members said they are not sure if their management companies take these important steps.
Reviewing your contracts may reveal areas for optimizing your budget. Or it may provide insight into where your association can get more for the same dollars, perhaps by extending your existing contracts at a better value or using the buying power of your management company to cut costs.
“We help associations find or save money, or alternatively, provide additional value,” said FirstService Residential, national director of procurement, Christian Mora. “Our 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.”
Closely looking at what communities of similar size and type spend on services (or benchmarking) is an excellent strategy that helps communities better understand how they rank relative to their peers. Accurate benchmarking of communities and high-rise buildings can only be accomplished by a professional management company with the resources and insight into the data of various communities.
So, in what ways does benchmarking help your board cut costs and optimize your resources? Picture this: an expert stops by and looks at your community’s landscaping contract and looks at how it stacks up against similar communities or buildings in your region. When they compare your property to the others in the area, they realize that you are paying 15% more for your landscaping. After scanning your contract line by line, they are reviewing to make sure you’re not paying for unnecessary or more comprehensive services than you need, or if you’re just being overcharged in general. This information gives your board and management team the leverage to renegotiate better pricing or added value to better position 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 Pamela Caravello, regional director at FirstService Residential. “Contracts need to be evaluated annually so you don’t pay more than you need to.”
Choosing the right property 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 COVID-19 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 Mora. “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.”
Check Your Insurance and Investments
Uncertainty due to COVID-19 has caused insurance renewals to come in at higher costs than in recent years. And although factors like insurance carriers increasing restrictions and becoming more selective have been directly related to these increases, there are several steps your association can take to ensure your maximizing the value of your insurance coverage.
Did you know that more that more than 50% of board members have relayed to us that they are not confident they are getting the highest return on their reserve fund investments? It’s imperative that 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 was the last time you reviewed your insurance plan and coverage options? Ensuring that you have the right insurance doesn’t mean having the lowest premium, it’s a cost-effective plan that has your association and residents’ best interest in mind. Low premiums can often come with high deductibles or risky exclusions; and, don’t set your polices to auto-renew! But rather, work with your broker or agent on an annual basis to audit your insurance coverage and ensure that it is adequate based on your association’s operational costs and needs.
“Too many people think saving on insurance means getting the lowest premium, but a lot more goes into it than that,” said Lee. “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.”
Save on Energy Usage
One of the most effective ways to increase property value and save funds for your high-rise, mid-rise or HOA is by ensuring your building or community’s power usage is running at an optimal level. How much energy does your association use in common areas? Is the air conditioning a few degrees too cool? Are you using the most efficient pool heater for your location and type of property? Are the lights on when no one is using a space? Are you using excessive accent lighting in your landscaping? All of these are potential places to increase value and save money. One of the main responsibilities of your property management company should be to provide you with a plan of action and resources (working alongside your local utility company) to audit your property or community’s energy usage. This will provide you with the insight you need to ensure your making the most of your energy budget.
The COVID-19 pandemic is affecting the economy in ways that no one could have predicted. 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. Our comments about potential savings opportunities are expressions of opinion only.