Chrissy's Views

Review any vendor or supplier contracts

Review all utility charges with the supplier. This includes water, sewer, electric, gas, telephone, cable television, and any other utility for which you pay some other company. Ask if they plan any increases during your upcoming fiscal period. Look at their historical performance to see how much they normally increase their rates. Another important area for review, although not a utility, are the real property taxes and any personal property taxes the community pays. Call the local tax assessor to see if any changes are in the planning.

Examine the ADA compliance checklist to determine what you need to do to meet the goal of being ADA compliant in your office, sales center, and clubhouse. Incorporate improvements as you can into each year’s budget.

Next, think about the capital improvements that are needed in the community. Do you need to do some major street repair? Does the playground need new equipment? Is the maintenance shop in need of a new roof? Is it time to install a new blower motor in the wastewater treatment plant? Do you need new signage, lighting and landscaping at the entrance? These capital improvements, while they may be listed on the deferred maintenance list, are more often just things you “would like to do.” Try to include some of these “nice to have” things each year. From a marketing perspective, these are things that generally increase in a positive way the aesthetics of your community, and impress the prospective residents as they drive through the community. They also reinforce to the current residents the values you provide to them.

Finally, one of the last components of the budget is to study the specific schedules for complex categories. For example, if you have more than one employee, you need a specific schedule for wages. On that schedule, you would list each employee, their base pay at the beginning of the fiscal period, any allowances for bonuses, the payroll “load” (workman’s compensation, the employer’s share of health insurance, etc.), and any raises which you plan to make available to them during the coming year. Other areas where a specific schedule may be required would be for rent. In that case, the schedule would show the number of homesites that pay full rent, those that are on reduced rent along with the ending date of the incentive, and allow for new residents moving in and the rate of rent they will be charged. This schedule is also useful if you have more than one rate of rent in your community (corner homesites are more, lake front homesites are higher, etc.).

that are up for renewal during the budget period. Try to renew them now, during the budget creation process, so you aren’t surprised at the new rates. Consider the financial impact of bringing some of the work inside to staff to alleviate the payments to contractors. Be sure to take into consideration the skills of the onsite staff, the current demands on their time, and the equipment of the community before committing them to more tasks. Also review equipment leases and/or contracts for continuing applicability. Many communities lease their copier. Is it really large enough for what you do, or is it too large? Can you substitute a newer, better piece of equipment for the one currently under lease?

Components are not people. Components are items that the people involved in creating the budget use to better enable them to forecast the financial future of the community. The more components that are available and the more that you use, the more accurate and complete your fiscal forecasting will be.

How can you see into the future? One of the best ways is to look at the past! That’s right. The historical financial performance of a community is the first component that should be reviewed when creating a new budget for the future. Look at the various categories. Be sure you understand what charges, costs, and other expenses were put into each expense category. Think in terms of the big picture. Are there any planned changes to the operation of the community that will significantly increase or decrease these expenses? Are you increasing the usage of the clubhouse? Will that create more of a demand for supplies or cleaning? Are you subsidizing the uniforms of employees? Or are you planning on getting uniforms this next year?

When looking at past performance, it is helpful to go back more than just one or two years. There are sometimes recurring issues that only happen once every four or five years. Look at those unusual expenses and the timing to project a reoccurrence within the next budget period.

Look at the income side of the picture, too. What increases (or decreases) can you logically expect to take place within the next fiscal period? Are you planning a rent increase? Are you anticipating less late fees to be collected? Are you increasing your NSF charges? What about the application fees? Do you charge pet fees? Are they going up, staying the same, or being eliminated? Do you foresee net economic occupancy increasing? Do you think you will have more economic vacancies?

Consider the deferred maintenance list. This is a list of all items in the community that have been noticed as needing attention, but not immediately. For instance, when someone says, “Boy, we’re going to have to do something about the roof on the clubhouse within the next couple of years,” write it on the deferred maintenance list. Then, when you are preparing the budget, review these items. Which ones need to be considered within the next 12-month period? Which ones can comfortably be put off until the future? Remember that planning ahead for the expense and incurring it while it is still an option is generally less expensive than waiting until it is an emergency. At that point, funds have to be found from somewhere and the cost of repair is usually much higher.

Discuss the appropriate sections of the budget with your onsite employees. The maintenance supervisor should be aware of the total dollars allocated each month for repairs and maintenance supplies, for vehicle repairs, for equipment lease and repair. Other categories that are under his control should be discussed with him for his input. The onsite community manager or office manager should be aware of administrative expenses within the community office, total dollars allocated for office supplies, resident relations, and other functions that are under their control.

Allowing an employee to have input into the budget not only gives you as budget creator more input, but it also gives them more perspective as to how the community operates financially. It allows them to see how their day-to-day decisions on expenditures affects the bottom line. It also then gives you as the owner the future ability to pass responsibility for adherence to the budget to them. Encourage them to make spending decisions only after referring to the budget to be sure the money is allocated and available. Growing your employees and their worth to you begins with sharing responsibility. The creation of the budget is a great beginning.

Don’t stop employee input at the onsite level. If you have a larger corporate office, or regional managers, involve them in the budget creation process. They most likely see things on a broader scale than the community manager, and can give valuable input from a different perspective. With their overview of more than just one community, they are also likely to be more cognizant of events that may take place and can help plan financially for unforeseen expenses.

A well-written budget lays out every financial detail of your community that can be anticipated. It shows the sources of income, how much each will generate every month throughout the coming year, and any projected increases from any income source during the year. Expenses are listed as you expect them to occur, with seasonal adjustments for the appropriate items.

By making the budget as accurate as possible, it will work with you in helping you reach the financial goals of your community. Operational decisions should be made only after consulting the budget. In emergency situations, the budget can help you re-align expenditures for the remaining months of the year. At all times, you will know exactly how close you have come to reaching your monetary objectives for the year.

Even though a budget typically is written to cover a 12-month period, it is broken down on a month-by-month basis. When you look at anticipated income and expenses in bite-sized pieces, it is easier to keep the numbers accurate and on target. It is also easier to make corrections should some unforeseen event cause you to stray from your original projections.

Most communities collect rent on a monthly basis, although a few collect annually. For the bulk of the operations that collect each month, this format allows the income shown on the budget to be adjusted as you anticipate changes. These changes would typically include move-ins, move-outs, model homes being sold, rental incentives beginning or ending, and rent increases. In some cases, each resident has a 12-month lease, beginning when they move in. This monthly format then allows an astute community manager or owner to project the exact amount of increased income to expect in any one month.

Expenses do not remain constant throughout the year. In most climates, there will be a seasonal fluctuation in gas, electric, pool expenditures, and perhaps even personnel. Planning for the future on a monthly basis is the only way to accurately reflect these variations.