5 Essential Steps to Determining Your Association Budget
Preparing your homeowner association or condo association’s annual budget is no small feat! It comes with a series of tough decisions. But if you want your association to thrive, it has to be done well. Here are five essential steps that will streamline your association budgeting process this year.
1. Determine Community Goals
In order for your community to grow and improve, you’re most likely going to need to spend. So start by identifying areas where you’d like to change and look for areas where spending money can make those goals come to fruition. Be timeline-specific about your community objectives so that you are able to write down the months when you’ll be spending with accomplishing goals in mind.
Your goals shouldn’t just be for this year either. It’s good to have community goals and plans for the next three years and five years so that it’s constantly improving.
2. Evaluate Recurring Costs
A large portion of your budget will go toward recurring contract services. Early in your budgeting process, you should send out requests for proposal for next year’s service expenses. You want specific numbers rather than rough estimates. Once you have those numbers set in stone, you can see how they will impact the rest of your budget.
Although some expenses are bound to be consistent year to year, it’s important to not automatically consider last year’s expenses as necessary. Evaluate every item on last year’s budget. You should be considering not just if an expense is necessary but also if there’s a strategy you can employ to save money on the item. Sometimes this might mean negotiating vendor contracts or choosing to purchase items in bulk.
3. Don’t Just See Price Tags—See Returns on Investment
It’s tempting to start your budget by determining what you’re willing to pay for. But rather than just looking at the price of an investment, look at how much the return might benefit you. These are the investments you should prioritize in your budget.
One example of an investment might be updating your technology. Although technology can often be expensive, it’s an area where you will likely see a strong return on investment, making it a smart spending choice. Software or innovative tech is a great way to streamline administrative processes for the benefit of your community.
4. Review Maintenance Needs
The best indicator of your community’s future maintenance and repair costs are your past maintenance and repair costs. This estimate is the next thing that should go into your budget! However, factoring in the current conditions of the community is crucial. Are there ways that community officers are wanting to improve? If so, what are these costs going to look like? Make the necessary adjustments and add them to the budget!
When you’re making assumptions for your maintenance and repair needs, add some notes to your budget. This will help you remember why certain numbers are what they are months down the line.
5. Don’t Let Delinquent Fees Derail Association Budgeting
One thing that can quickly eat away at your association’s budget is delinquent fees. Even when you are proactive about communicating the deadlines for paying these fees, having some members of your association miss payments is pretty inevitable. Rather than letting this derail your budget, turn to LM Funding! We have a solution where we collect overdue fees on behalf of condo and homeowner associations and protect your bottom line. To learn more, contact LM Funding today!