This year was certainly abnormal for budget planning due to the pandemic. It’s not prudent to base 2022’s budget based on 2021 actuals.
Despite the not-so-average year, we're only two months away from 2022, which means your 2022 property budgets should be nearly finished by now. Are they? If not, there are things you can do to get your budgets moving forward and on track for the new year.
One option is to go all in with a Budget Bootcamp. Ascent offers a Budget Boot Camp for multifamily property owners and managers where we analyze past budgets, including general ledger coding guidelines, before working with your team to create a new budget for next year. We have completed several this Fall and, in some cases, have created and completed a budget in less than a week.
The bootcamp is a multi-day course that helps managers and staff prepare individual property budgets to ensure that the new year’s budget plan will turn out maximum profitability. We look at areas that have become more critical due to the pandemic, like turnover, raising rents and reducing loss to lease.
One East Coast client that completed our Budget Bootcamp called the program an “invaluable experience”, adding that it “offered the opportunity to get our entire staff and regional managers on the same page for our 2022 budget. After we finished the program, we were able to complete next year’s budget in just two days.”
Another client out of Texas that required a more invasive budget process said they were surprised at how easy it was to learn and apply the budgeting concepts once we laid them out. Anyone can prepare a proper budget with the tools and guidance we provide.
If you can’t schedule a bootcamp, but still need to finish your 2022 budget, here are six steps from our Budget Bootcamp to get you back on track:
- Start with reviewing how you assigned responsibilities regarding the budget last year and ask yourself if those assignments worked well. Whose input was valuable? Who got it right? A good rule of thumb is to include the property manager, regional manager, human resources and accounting. After each group has added their own input, a final review should be conducted by either the controller or CFO. A sample timeline, complete with who should complete which tasks, can be found on Ascent's website.
- Review your data from this year to combine with data from prior years. While it's not a complete look at this year, the contracts, expenses and revenue should still give you a strong grasp on the trends for the end of the year going into the next fiscal year. These trends are vital in preparing a budget that takes into consideration any upward or downward shifts your property has seen over recent years.
- While looking at this year's budget and data, evaluate if any new budget categories should be created. Ask each group included in the process if all categories were used, or if any can be removed. Additionally, ask if any new categories should be added to capture any revenue or expense that isn't currently being captured.
- Once you've completed your research, compare your numbers to market data you find for properties that are similar to your size. See if contracts are comparable to properties your size and in your area, and if you're spending similar amounts in your budget. If there are large discrepancies, review what the differences are to see if they are in your favor, or if any part of the budget or contracts should be reviewed further for a better benefit for your property.
- After data is compared, it's now time to start developing your first draft for next year's budget. If your budget software seems outdated, this is also the perfect time to look at options for property management software to make sure it includes a budget application to your liking.
- All that's left after creating the draft is to fine tune and finalize. Once the fine tuning is done, the budget should be set in stone with no other modifications allowed.
In addition to our Budget Bootcamp, Ascent also offers a budgeting consulting service for any property owner or manager seeking advice or hands-on training when creating or reviewing a budget.
Our budgeting consulting services identify five key indicators including:
- Performance targets
- A baseline for property management reviews
- Income and expense projections based on market drivers and assumptions
- Capital improvements planning and projections
- Problems that need to be resolved
Ascent’s proven success with property budgeting has meant the difference of hundreds of thousands of dollars for its clients. In addition to experienced property budget consulting, Ascent also offers training on tools and techniques with all of the major multifamily accounting software platforms including RealPage, Yardi, Resman, Entrata and Appfolio.
If you are interested in taking advantage of our budgeting consulting services, you can reach out to me at firstname.lastname@example.org.