As a community association board member or property manager, you know that effective budgeting is vital for your community to function smoothly. Your budget serves as a financial plan, outlining anticipated revenues and expenses and guiding day-to-day operations, long-term planning, and decision-making. Check out some frequently asked questions and best practices for a well-structured budget!
Why do community associations need a budget?
Budgets are vital because they provide a clear financial plan for your association. Some state statutes, like Florida, require community associations to have a budget.
Who should work on the budget?
Form a budget committee composed of the property manager, board treasurer, and interested residents – ideally those with financial experience. This ensures diverse perspectives and informed decisions during the budgeting process.
When should the budgeting process begin?
Begin the budgeting process well in advance, preferably 5-6 months before the fiscal year ends. This provides ample time for thorough research, analysis, and community input.
Budgeting Best Practices
Start with last year’s budget, reviewing expenses and revenue to look for variances that may impact next year’s budget. Document those variances for future board use. Here are some other tips as you start work on next year’s budget.
- Agree on goals and objectives: This is a great starting point for your committee. Communicate goals to residents to ensure transparency and support.
- Collaborate and iterate: This isn’t just your property manager’s job. It needs to be a team effort, as you evaluate options and make informed decisions. Plan on multiple budget drafts!
- Be flexible: You can’t please everyone, so you’ll have to prioritize essential items (like insurance and maintenance) over nice-to-have items like flowers and socials. Leave some room for unexpected situations, like storms or price hikes.
- Age well: As your community gets older, you’ll need to allocate more to maintaining buildings and amenities. Regular maintenance extends the longevity of assets and prevents costly repairs.
- Review insurance coverage: Costs are skyrocketing. Ensure you have adequate coverage, including liability and D&O (protects board members, and budget for expected increases.
- Catch up on reserve funding or projects: Prioritize underfunded reserve accounts or deferred maintenance projects to avoid future financial strain.
- Raise the dues: This is a business, and we’re living in inflationary times. While you may be able to cut costs in some areas, it’s better to raise the dues a little each year rather than kicking the can down the road for big increases or special assessments.
Need a budget expert (or mediator)? We can help!
Budgeting is a critical process that requires collaboration, foresight, and flexibility. A well-managed budget fosters trust and confidence among residents, the board, and property manager, helping your association thrive and meet its long-term objectives. Contact us today for help with your budget and make your community a better place to live.