8 Ways to Prepare for Budgeting Season

Like baseball has spring training and football has training camp, budgeting has its own preseason. It’s the time before the crunch that property managers and administrators prepare for planning the next year’s budget. Or at least they should be.

Never mind the two-a-days, budgeting preparation shouldn’t be that exhausting. But advance preparation should be spent getting ready for the unceremonious plugging of the numbers that establish a game plan for apartments of all scales and sizes. Spreadsheets and accounts should be honed, data import and export refined and reporting dissemination fine-tuned.

Getting ahead before budgeting season hits

Budgeters can get a jump on the season by asking a few questions before the first number is slotted. For starters, talk with operators and asset managers to discuss changes to the budget process. Also, define due and review dates, and decide who needs to be involved in the process. And, notify managers to start gathering important data prior to budget time.

“It’s extremely important to gather information and data that will be crucial to the budgeting process,” says Christine Bright, Vice President of Operations at RealPage, Inc. “Think of it like establishing a game plan, working with key players in the organization to execute how the property will tackle the coming year. You can’t just put everybody out on the field, with no direction, and expect them to reach the end goal.”

Bright, who has 23 years of property management experience, offered her thoughts on how to prepare for budget season and what preparers need to update within web-based property management accounting systems before getting started. She has worked in the apartment industry as a property manager, regional manager, district manager, asset manager and national education director for large multifamily companies.

Here are eight areas Bright offers that budget preparers need to address during the budget pre-season:

1. Update and check master charts

Review your chart of accounts and determine if you really need all of the General Ledger Accounts activated for every property in the portfolio. A common mistake is that more GLs are established than actually used. Too many GLs slow down web-based systems and Excel spreadsheets become so large they are difficult to manage. Another common issue is that it often confuses budget preparers as to what ledger to use to budget their line items. The result can cause a major rework or re-classing of the budget.

Also, this is a good time to review account groups to see if report structures need to be changed, and to add a narrative or comment to define GLs that are often miscoded so that budget preparers use the right GL to budget income or expense items.

2. Import and test data

Proper data import and export are crucial to the budget process. If data does not import or export correctly – or at all – then a seamless budget flow gets dropped behind the line of scrimmage. Bright says it’s important to schedule data imports and test the system by importing for at least one property’s data for review. Look for values that import with the wrong sign (+/-). GLs that are typically combined in monthly reporting and imported separately, as well as contra-account GLs, could impact formulas and calculations.

3. Update payroll

Update new rates for worker’s comp, federal and state tax rates and benefits for each property, and add new employee positions if needed. Update employee property counts, and add and/or edit employee changes. Nationwide the average staff turnover is 65 percent, which impacts salaries, new-hire costs and training. Having this information in advance save a great deal of time in the preparation process.

Also keep in mind that benefits usually show a price increase mid-budget and not just in January. Finally, it is important to know which months are three-pay period months. Most budgeting software accounts for this, it can be overlooked when using older Excel budgeting methods.

4. Create new models or templates for budgeting and forecasting

It’s important to identify who will be involved in budgeting, Bright says. Identify the players and what section or sections each person will be able to access. Don’t forget to establish due dates for each property.

Bright also said it’s important to determine what historical data should be set up in the models, and how frequently data is imported for the GLs. This also includes operational data such as future lease expiration dates, market and effective rents and historical occupancy trends for move-ins and move-outs

5. Check custom worksheets or calculations, add, edit or make inactive

Sometimes, custom worksheets or calculations need to be created to meet budgeting needs, like if a calculation must involve or reference multiple GLs to get an answer. These should be created, updated or made inactive before budgeting begins. Use formulas to calculate costs related to turn expenses, utility revenue, and management fees. Anything that ties into statistical data should have a custom worksheet or formula.

6. Distribute to one property and review

Before rolling out the entire budget, distribute the budget for one property and review. Make sure all the calculations are linked properly, data is populating the appropriate section of the budget, formulas are locked down if you are using Excel and workflow is appropriate when using budgeting software.

Also keep in mind, if using Excel to budget that not all budget preparers have the same version. This can result in corrupt files, formula and linking issues, as well as saving issues. Bright says this is a good reason to employ the standardized format of a web-based property management accounting system.

7. Establish who’s on first

Determine who will update forecasts and make sure they are linked or visible to the budget preparers. Make sure there is a clear plan on who will be updating specific sections of the budget. Being able to compare where the property will finish the year and begin the new budget year are critical.

8. Check and cross check

Ensure there are variance reports to compare year-over-year dollar and percentage variances using forecast information. After reviewing annualize information, check each line item to make sure that monthly values makes sense. A novice budget preparer can easily miss entering a monthly value or just copy values from previous year’s budgets.

When all is said in done, remember not to stress. Budgeting is important, but because the multifamily housing industry is subject to economic and demographic change, your goal is to budget based on clear historical trends, projected sub-market expectations, and a good measure of common sense.

Learn more about RealPage Budgeting. 

(Editor’s note- we have updated and republished this article to benefit readers new to Property Management Insider.)