Creating a solid budget for a homeowner or condominium association is a lot like putting together a jigsaw puzzle. It requires time and concentration to piece together the many parts into a whole. A strong budget is the financial backbone of the community. The more accurate the budget, the more financially stable the association will be. Thus, breaking the process into manageable steps can simplify the process for both the managing agent and board members.
Goal Oriented Planning:
The budget is a tool which allows the managing agent and the board to get a clear picture of their current financial situation and it gives them the ability to better plan for the future. By knowing the association’s goals going in, all involved parties gain a strong sense the community’s needs, strengths, and weaknesses. This allows for informed decision making and appropriate long term funding.
The accuracy of the budget is the most important aspect. Without a realistic budget, the appropriate parties cannot make responsible choices. This makes long term planning an important part of budgeting. Understand the larger projects for the community and get good estimates. Examine the actual expenses of the previous years and note any trends. Look for instances where rates are likely to increase. Take time to review existing and new contracts to ensure they continue to meet the community’s needs.
Conduct the Reserve Study:
A current reserve study will identify any large scale projects that the community will have to plan for in the near future. Whether this includes roofing projects, paving projects or anything in between, the study will show where funds will have to be appropriated. It helps the association manage their major components as well as their financial investments. In itself, the reserve study is a blueprint for the association to follow.
Plan for the unexpected:
When piecing together the budget it is important to account for the amount of revenue that may be lost throughout the year. Take into consideration the number of delinquencies in the community. Homeowners who do not stay current with their fees can adversely affect the budget. Be sure to have a collection policy in place to ensure timely remittance from homeowners.
Remember that the budget is a guideline and it is okay to be flexible as unexpected situations do occur.
Creating an association budget does not have to be overwhelming. Begin the planning stage early, so that the association has plenty of time to understand what each figure means how it fits into that year’s budget. Look back at the actual numbers from previous years and compare the trends to make accurate projections for the future.
Finally, be sure to allow ample time to distribute the completed budget to the association. Include an explanation for any fee increases and be sure to announce any exciting new projects in the coming year.
Access Property Management (APM), LLC is a full service management company for common interest community associations and commercial properties throughout Pennsylvania and New Jersey. APM is an Accredited Association Management Company and Accredited Management Organization, which demonstrates our excellence and commitment to our clients.