One of the most important responsibilities in property management is establishing a budget for the coming year. However, for key decision-makers, it is also one of the most difficult.
According to NAA/IREM data, taxes and insurance account for 32% of most budgets, followed by 26% reserved for administration and payroll expenses. With only 42% available for things like maintenance repairs and utilities, as well as unknown expenses, operators have to get thrifty.
Industry professionals gathered for the 2023 Apartmentalize session “Every Dollar Counts” to discuss how technology has pushed the evolution of budgeting, forecasting and reporting processes for modern operators.
There are plenty of pain points associated with outdated budgeting practices, including a lack of transparency and the inability to adapt to changing market conditions. And without proper visibility and input based on data-driven insights, budgeting season can become a constant nightmare.
“Budgeting has become a year-round activity in one form or another, and as a result, we had to find a way to better manage our time,” says Tim Kramer, Vice President and Director of Operations for Draper and Kramer. “To me, that’s the value of a software-based tool that can consolidate budgeting tasks – we save more time, as well as gain the capability to adapt.”
Adaptation is crucial to any budget, especially in a volatile economy where conditions change from market to market or even neighborhood to neighborhood.
“Everybody has a different expectation of what our budgeting number should be,” says Anne Hollander, Chief Executive Officer of Lobby CRE. “A big pain point is the lack of visibility of market conditions in real-time. Opposed to an Excel spreadsheet, software-based tools provide us the ability to understand market conditions and adapt as needed.”
To execute a successful budgeting strategy and have a competitive edge, it is important to have the right tools at your disposal.
Choosing the right software for your organization, whether it's a single-stack or best-of-breed solution, is paramount to meeting owner demands and creating a realistic budget. Single-stack software providers offer a platform with all features and functionality integrated into a single system, while best-of-breed software typically provides an open API for seamless integration with other tools.
“After you figure out which software works best for your organization, single-stack or best-of-breed, it is important to develop a relationship with your primary software provider,” Kramer says. “Have the discussions and ask the hard questions, like where has this failed before and is this in full release or just beta testing. Also, confer with your peers and ask about their experiences with the software you're looking into.”
Software-based tools simplify collaboration and communication throughout the budgeting process. By utilizing technology, operators can work from a centralized cloud-based system, reducing friction between colleagues.
Budgeting is indeed a sophisticated task that takes a tremendous amount of time and dedication. But with the right software and understanding of the data laid out in easy-to-define formulas, operators can set realistic expectations that not only make their lives easier but appease owners and investors.
Andrew Ruhland is an Account Executive and Content Writer for LinnellTaylor Marketing.