Fall usually marks the start of the annual season, a time when financial analysts at property management firms are incredibly busy. In this season, beyond their usual responsibilities now comes the need to accomplish a very important, complicated, and potentially detailed project.
You may see it by a change in the swiftness with which they respond to your emails and other usual requests. You may also notice that many are even working overtime in order to meet the needs of their property load.
The fact is we see it all the time. Year after year the annual budget process becomes what we like to call ‘the rushed budget process’ and it usually goes something like this:
- A draft is prepared by the managing agent
- Said draft is distributed before a meeting
- A decision is expected at that very meeting
While we understand the pressures placed on the staff during this time of year and are grateful to the financial analysts we work with for their hard work as auditors, we work for the property’s board. That said, this process is tailored for board members!
Our experience is that the ones who attach detailed calculations to back up the budgeted amounts tend to be the most accurate. While a board may not hear during the year of their success in the budgeting process, they will see, hear, and deal with any shortcomings. We suggest you take a look at these recommendations now to establish board guidelines that make the process easier:
- Add more lead time before the meeting that the draft will be presented.
“Just in time” is good for operating businesses to save on costs, but for budget distribution purposes, it tends to leave volunteer board members who also have many other things in life to deal with at risk of not having enough time to prepare. The default position for many is silence and acceptance, but that is not a stance a true leader of your community should take. Resist any temptation to taking this path. Stand and say we need to slow the process down, if necessary.
- Have the expectation that meetings may be held more often during this time of year
Sorry, but you would need the best financial analysts in the industry to complete your budget with the process that we usually see happening everywhere. Slow down and make time to discuss more. Several meetings might be required before you get things right, but that’s okay! The goal is to create a superb end product that benefits the board in many ways, including time saved from focusing on why there is not enough money to pay bills and how to fix things later. A well-prepared budget is an enhanced tool to utilize in monitoring your property‘s finances all year long.
- Assure that all hired professionals are used as resources
You pay them all year long and each of them can bring a lot to the table in regard to better information and savings than someone without their expertise. You should make use of the skills you have among the professionals who already work diligently for your property. Have the insurance broker provide information on the insurance renewal, fuel oil company on the trend of pricing and whether the premium for entering into a set price contract makes sense (the latter allows for less risk of deviance from the budget for heating costs.) and consult with the auditor for corporation taxes and annual fees.
- Ensure each board member’s questions are properly vetted
During board meetings, we tend to spend so much time discussing other people’s agendas that we can lose our own perspective if we are not careful. Silencing board member concerns can be costly, so it is best to keep the conversation flowing.
- Ensure all services and vendor contracts are reviewed regularly
One value offering conversation that often gets overlooked during board meetings is the topic of contracts. Board members should take the time to investigate contracts, establish a list of the property’s vendors, and document renewal dates. Periodic consideration of each vendor’s performance and cost tends to improve satisfaction and minimize costs. Industry’s shift and there may be another vendor who does a better job for a lower cost, but you won’t know unless you evaluate and budget time to better understand what is occurring. There is no rush to get this all done at once, however, establishing the list and rationally moving through it over time is the goal. Assure that there is careful documentation of the changes and important aspects to each draft version so that everyone is on the same page.
- Develop a communications plan to inform unit owners of the need for an increase
Unit owners expectations will be whatever they want them to be unless they understand reality. By simply distributing information on important aspects of the budget, unit owner concerns are alleviated, and questions are diminished. It can be as simple as sending an email or two to unit owners during the process. This also sets the stage for the unit owners to see the hard work being done by board members. Yes, they elect you, but as a volunteer, you work for all unit owners. The most frequent issue unit owners have with boards is lack of sufficient communication, don’t let that be your board!
If you are reading this early enough in the season, accept this as a call to action. Evaluate your existing budget process and work toward improving it now. Prepare your fellow board members for an expanded process and if you experience any difficulties, use the guise that you want to limit any potential increase. We want you to come out of this process feeling like a budget champion and understanding more than you may have ever cared to before.
With over 35 years of experience serving co-ops and condos, the Czar Beer team can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property. For more information, contact us at email@example.com or (212) 397-2970.