5 Budget Blunders to Avoid
You know how important your association finances are. Making mistakes when planning the next year's budget can be deadly for the financial health of your association. Developing a budget may not be a lot of fun and it certainly can be stressful trying to anticipate your association’s financial needs. However, there is one thing you can do relatively easily to make sure you avoid some common budget pitfalls, and that is to check out our list of 5 common budget mistakes you need to avoid!
1. Suddenly raising fees
It’s no secret that the price of products and services continues to go up. Unfortunately, many communities fail to plan for these inevitable increases and to make up for shortfalls, they are then forced to raise fees all at once.
2. Using a special assessment to fund regular operations
Special assessments have their place, but they shouldn’t be used for regular operations or maintenance simply because you didn’t allot enough money for unexpected costs.
3. Not funding reserves properly
Without enough money in your reserve fund, your association will not be able to make needed capital improvements. Setting that money aside not only enables you to fund needed improvements, but can also affect your ability to get a loan. Conduct a thorough reserve study to know how much you need to save.
4. Running a budget deficit
Are your vendors paid on time? Does your forecast match your spending? No?
If you are more than 60 days behind on accounts payable, you may need to add a special assessment – and no board wants to do that.
5. Assuming that certain expenses are fixed
Evaluate your so-called “fixed” expenses while you are developing your annual budget. Instead of simply annualizing vendor costs, consider whether you might be able to negotiate better rates. If this is not an option, shop around for more competitive rates.
Your annual budget is much more than just a bunch of numbers. It provides the framework for maintaining a quality lifestyle for your community’s residents. Learn from the mistakes that other associations have made to keep your finances as healthy as possible.
We know budget season is stressful and we want to help! Fill out the form on the right to download our results and discover red flags your Texas homeowners association or condominium association should be looking out for when it comes to budget planning.