How to Successfully Review Your Budget
Digested from Property Management Insider
Fixing poor budget analysis starts with defining your goal.
If your budget analysis is leading to poor results, Christine Bright says there are usually three culprits: a failure to define the goal, not accurately projecting the end-of-year numbers and ignoring the details.
Defining a goal is more than just saying you are going to grow revenue by 5 percent, for instance.
“By not knowing the what, how and how much it is going to take to get that 5 percent income growth and having a direct plan for maintaining expenses, you are just looking at numbers in the review process,” Bright writes for Property Management Insider. “Dig deeper. You may want to keep your budgeted expense the same, but the likelihood that your vendors feel the same way is doubtful.”
To fix projection issues, Bright advises apartment operators to evaluate forecasted values for the current year and determine if there are any expenses that will or will not be required next year.
When it is time to analyze those results, remember to dig into the details.
“Analyzing details and comparing values will help identify timing issues, budgeted values that have seasonal impact and are averaged or line items that are budgeted just because they have always been done that way,” Bright writes. “If you were to only look at summary values, you will find yourself explaining variances to your owners month after month.”