Tuesday, 21 November 2017

Tips for Better Budgeting in Property Management

Written by Posted On Tuesday, 14 November 2017 23:54

Canadian property management firms often have difficulties when it’s time to create budgets. Creating property management budgets can be particularly difficult because there’s a lot of macro elements that need to be heavily considered, like economic forecasts and market conditions. There are also variables like unpredictable economic changes that could impact leasing, as an example.

 

There needs to be research done to ensure that your property management firm has an optimized budget, and along with that, the following are some tips for a smoother, more effective budget-setting process.

 

Expense Management Software

First and foremost, if you’re a large property management company, and particularly if you’re operating across the country or internationally, you’ll need some pretty sophisticated software.

 

One tool that’s important is expense management. Finance teams need modern expense management to help them have real-time data and analytics that can power their budget-setting based on what’s happening internally.

 

It’s key to look for a time-saving solution that will provide everything related to expenses in a centralized location because then that information can be used to see where changes might need to be made, and budgets either need to go up or down.

 

Beyond expense management, you might also want to look for property management software that integrates with financial software so you can see a full history of properties as you need it.

 

Forecasting Isn’t A Guessing Game

One of the biggest mistakes to avoid when you’re setting a property management budget is to avoid the idea that forecasting is all about guessing. You need to be able to forecast in a way that’s methodical, and you should do this before you actually start budgeting.

 

Be Honest with Yourself About Capital Projects

When you work for a property management firm, you can start to overlook the areas that need improvements because you’re quite honestly used to them. It’s important that before you start budgeting, you do walk-throughs of properties or have employees do them, and during the process, you have to be clear-eyed regarding what needs to be done.

 

You need to be realistic about the issues that need to be tackled because it’s better to go ahead and do this than not to include them in your budget and be very off at the end of the year. It can even be advantageous to have a third-party go through and assess the need for various capital projects.

 

Don’t Overestimate

While you do need to make sure you're thorough when addressing the need for capital projects in your budget, don’t just plug numbers in so that you can cover yourself or pad your budget. Much like forecasting, it’s not a guessing game.

 

You need to only put in numbers that are based on real data or historical trends, and if you didn’t budget for something during the previous year, don’t do it during this year’s planning just to put something in.

 

Finally, when you’re budgeting make sure that you have the evidence necessary to show why you’re doing what you’re doing. If you’re presenting budgets to owners, that can make your life and theirs a lot easier.  

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