In a typical year, budgeting is a challenge. In an unprecedented year filled with market shifts, fluctuating rent collection, and a spike in technology use, budgeting for the future can seem like an impossible task. By taking a look at factors that are likely to affect your business in 2021, and creating a set of goals or objectives for the upcoming year, you can effectively develop a budget and easily make financial projections. As you begin to lay out your plans and evaluate your business operations for the full calendar year, keep the following tips in mind to feel prepared in this ever-changing landscape.
Do Your Homework
Before diving into number crunching, take a hard look at your cash flow and payables, and simplify where you can. Reviewing current revenue, financial reports from the past 12 months , staff salaries, and average utility costs can help establish a solid starting point, and then factor in potential growth for the upcoming year. Your Balance Sheet or Profit and Loss reports are a great place to start. Additionally, looking at current expenses—like lawn/landscape care, maintenance supplies, and software—shows what portion of your budget is already accounted for.
Find the Time
Budget season is not the same for everyone. Some businesses have next year’s budget mapped out by October; while others are just getting started. Budget planning is not a task you can accomplish in an afternoon. It’s imperative to set aside adequate time to have discussions with your team and understand the market and economic conditions to ensure needs are met for the upcoming year. Working in a dynamic industry like property management, it’s a good practice to set aside time each quarter to assess performance and see where finances could be optimized.
While budgeting for properties used to be more of a “push-and-pull” process, COVID-19 has made prioritization a necessity, according to Multifamily Insiders. Budgeting for 2021 is all about needs over wants. With an increase in technology use due to social distancing, many companies plan to allocate a portion of their budget to tools and technology to gain a competitive edge. Investing in a holistic platform like ShowMojo or Tenant Turner could be a great step to automate your leasing process and provide a pleasant experience for prospects. In addition, businesses will need to consider extra sanitization processes and PPE for staff and residents. Next year may not be the year that your property gets a new pool or gym, but by including these new items in your budget, you could see a payoff through increased tenant satisfaction and new leases.
Forecasting is an extensive process of estimating gains and losses for the upcoming year. Not knowing what to expect in 2021 further complicates the process. You may need to reforecast frequently next year to stay on top of trends and continue to effectively position your business. As we know from 2020, being open to change and remaining flexible will be key as we move forward. The numbers you set now may change in two months, but having a general list of objectives and by setting priorities, decisions will be easier to make later in the year if it comes time to make cuts.
As this year quickly pushed us further into the age of technology, now is the time ditch the file cabinets full of receipts, tedious spreadsheets, hopping in and out of multiple programs. Feel completely confident in your financial management by switching to digital organization. Through Rent Manager’s complete accounting capabilities and comprehensive budget feature, you can plan your finances with ease via statements like the Budget Comparison Report or Fiscal Year Budget Report. Ensure your company spending is on track. Measure income, follow expenses, and develop informed financial projections.
Don’t let your budget weigh you down. By preparing ahead of time and being ready for anything, you can avoid budget pain all year long.