A seasoned community manager understands the importance of budget season. From building meaningful relationships to bidding for contracts, certain budgeting tactics can only be learned through experience. We spoke with a community association manager with over 15 years' experience to help you prepare for budgeting season.
Managers know that the early bird gets the worm. It is crucial to be proactive in the property management industry if you want to succeed. This is especially true when bidding for contracts.
It is important for managers to bid for contracts well ahead of schedule, according to our community association management expert. As soon as summer arrives, our experts start bidding for snow plowing contracts. They know it's hard to outbid the competition when autumn arrives. Don't forget that you are not the only one requesting a quotation for a service- so keep that in mind as you begin to submit bids for seasonal projects.
To effectively manage your community, you should apply this principle to all aspects of your operations.
If not now, then when? Think about it now- and not then.
There is a plague of fixation on the bottom line in the management industry. The community can go under without proper money management if you don't keep your head above water. Boards often think that tightening expenses is the best course of action.
But at what cost?
A cost-benefit analysis can be used to assess the expense of being loyal to your contractors.
Let’s say you have a contract with a landscaping company that has been working with your association for 10 years. If you were able to save $1,000 by switching over to another company- would it be worth it?
There are certainly intangible benefits that you may have developed with the first company that might not be guaranteed with for the second company. It provides better service, you are prioritized.
The first company may know everybody in your association extremely well- on a first name last name basis. A bond that has been built over 10 years. They may provide extra services free of charge- like site inspections for future landscaping endeavors. There could be so many different benefits of working with a loyalty contracts that can’t be evaluated against a dollar amount.
Here are CAI's main points of emphasis when it comes to budgeting.
Be specific
Instead of dividing your total yearly expenses by 12, specifically assign budgeted expenses in the month in which the expenses are expected to be incurred.
Get Approval
Require approval from the board for checks in payment of non-budgeted, non-recurring
expenses in excess of an established limit.
Monitor and Review
Analyze the income statement and budget on a periodic basis (at least quarterly).
Refer to your community association’s governing documents and management contracts to define formal budgetary roles and responsibilities. Ensure that roles are expressed clearly to all involved to ensure that expectations have been met.
Here are the responsibilities of those involved in developing community association budgets:
The board of directors is generally responsible for establishing, approving, and monitoring the community's budget. They can set the budget themselves, but most delegate this responsibility to their manager or accountant. It is important for directors to consider the following factors when reviewing a proposed budget:
The treasurer is responsible for preparing and reviewing the draft budget. They delegate the initial preparation of the budget to the manager or accountant. If necessary, the treasurer will draft the budget with the finance committee.
Receiving comment and feedback on the proposed budget is essential for the Treasurer. Participation and support is important for any of the following:
The proposed budget should be sent to owners in a forum that is agreed upon by the board. It could be in the form of a community meeting or sent for review by a specific date. Community-governing documents typically require an open meeting be held before the board adopts a budget.
Some state documentation requires that budgets are passed by a vote of the owners. While the board is responsible for final approval, the above section emphasizes the importance of owner involvement in reviewing the proposed budget.
The management contract usually outlines the manager's formal budget responsibilities. In spite of the absence of specific written responsibilities, the board may expect the manager to:
Performing services outside of contractual agreements should not be expected of managers. In order to determine the level of manager involvement in the budget process, community associations should review their existing management contracts.
It is important to review and negotiate any desired changes to the services.
Traditional Budgeting
Traditional budgeting is a method of budgeting that uses the previous year’s budget as a reference point for the next year’s budget.
Zero Based Budgeting
Zero based budgeting is a method of budgeting that uses zero as the starting point of the budget and projects the budget of the property based on estimated data. Each item within the budget is analyzed and considered through decision-making by the board of directors.
The rise of inflation is causing many services to increase in price. It is important that homeowners understand that dues and fees may increase as a result of inflation. Boards are always focused on the bottom line and keeping fees low, but at what cost?
Associations shouldn't only focus on saving dollars- this could actually hurt them in the long run. Ultimately, the community will suffer without the proper amount of money invested into upkeep services. It is not easy to convince homeowners to pay more per month, but it will increase property values, maintain communities, and improve property quality.
Think about it like this- you wouldn't buy an expensive car and not pay to change the oil. You would ruin it. It's the same with your home. It is an ongoing investment if you want to maintain and grow your home's value.
According to this survey conducted by Community Association Institute, 71% of respondents expect maintenance prices of amenities such as the pool to increase this year due to supply chain issues.
Long term planning
“When is the best time to plant a tree? Right now or 20 years ago?”
Conducting reserve studies essential for long term planning. The decisions you make today will affect the future for time to come. It’s within your association's best interests to conduct long term planning to forecast budgets more accurately. This can save you money and time- so do your due diligence and plan for the long term.
How common are the following reasons some associations are reluctant to conduct professional reserve studies? According to this study conducted by the Community Association Institute, 91% of associations don’t recognize the long-term cost and benefit of conducting professional reserve studies.
“Without a reserve study for proper long-term planning, association directors are making themselves legally responsible for using improper business judgement.”
Community management has been evolving over the years- with new technology and innovation shaping the industry. Understanding how to leverage technology to automate your daily processes is a great way to optimize your workflows. From management portals to apps- we will discuss the advantages of new technology and how they can take the place of traditional practices.
Automation is the future, and that also extends to property management. There are many tools out there that automate what used to be manual processes. One of the areas that automation has taken over in the management industry is communication.
There are several ways to automate communication between managers, homeowners, board members, and more. One of those methods is by using STAN. STAN is a property management chatbot that instantly responds to homeowners, 24/7. STAN frees up your community manager and provides instant assistance to homeowners about ANY issue.
In addition to reporting complaints and emergencies, homeowners can submit maintenance requests, retrieve account and payment information. As a result, they are not required to contact the manager of the community to accomplish any of these tasks. STAN handles the easy tasks, while managers focus on the big picture - budgeting, site inspections, etc.
Board members might wonder whether or not to integrate a tool like STAN into their budget. After weighing the pros and cons- our experts believe that adding a tool like STAN can increase productivity while minimizing costs.
Instead of hiring someone or responding to homeowner communications yourself, it's more cost-effective to use a tool like STAN. As we're experiencing a labour shortage, having a digital assistant like STAN can save you both time and money.
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