Third Quarter is the
By Mike Ballard
Partner, Ascent Multifamily Accounting
Best
Time
to
Budget
THE
and Here’s Why
T
hroughout my career, I’ve helped countless cli-
ents map out a plan for success for the year to
come. Oftentimes, that assistance includes a
budget, along with a one-year plan, that outlines
everything a property management team should
know regarding their fiscal identity.
As any veteran of the industry can tell you effective bud-
geting is no simple task. It requires time, attention, and a
deep understanding of where you’ve been and where
you’re headed. Ultimately, it’s based on resources that are
usually already stretched thin.
As the year winds down, most property managers put
their budgeting process into action. I employ a multi-step
process which includes an effective strategy for assigning
individual responsibilities, as well as engaging methods for
reviewing research and market data, but a variety of meth-
ods exist. And while everyone’s process has its strengths, I
want to propose an out-of-the-budgeting-box idea that
alters them all just a bit: Start in September.
Time – your secret weapon
Many multifamily owners I work with have scoffed at the
idea of beginning the budgeting process during the third
quarter; January is still a long way away, and, after all, there
are still plenty of long summer days to enjoy. But despite
that notion, third quarter yields an incredible benefit that
most budgeters lack in the long run: time.
An effective budgeting strategy incorporates a fully de-
veloped schedule, complete with responsibilities divided
among your team members along with specific dead-
lines, and the development of that timeline alone can be
daunting. Even when completed, team members quickly
become bogged down by the day-to-day, leaving them-
selves little to no time to complete assigned responsibilities.
To take advantage of your newfound resource, begin by
scheduling an early September meeting with all the peo-
ple involved in spending the property’s money, including
any regional managers, as well as human resources and
members of the accounting department. This team will
review or edit the current year’s budget, and also discuss
any upcoming unforeseen needs, altogether providing you
with a detailed overview of each department’s respective
spending landscape.
Doing it right is different than you think
Do not procrastinate. Let me repeat that – Do. Not. Procras-
tinate. I’ve had many clients see their added ‘time’ bonus
as an opportunity to simply go through the same motions,
now at an extremely leisurely pace.
Instead, I suggest your newfound secret weapon provides
you a chance to go a step beyond your traditional meth-
odology. My system, for instance, incorporates a wide
range of external information into the planning process.
This can often involve a significant investment of hours, and
though valuable, the work is frequently ignored by property
managers as a result.
Depending on the size of your market, an analysis of ex-
ternal data – such as average costs per property and/or
unit, shared utility charge averages, or even trends in rent-
al habits – often uncovers key characteristics about your
competitive landscape, allowing you to develop various
vital market-specific benchmarks.
Of course, you’ll want to take the time to examine your
own data as well. Everything from your current rents and
occupancy, trailing 12-month financial reports, utility in-
creases and maintenance contracts, as well as marketing
and salary information, can shed light on opportunities to
maximize future-year revenue. While you should obvious-
ly have a handle on these assets at all times already, the
simultaneously reflective and forward-facing lens of the
budgeting process usually leads to some interesting insights
from familiar information.
Get the right people involved
Take note, you and your stakeholders are a team in the
budgeting process. Following any changes leading into
years end and be sure to gain approval from all interested
parties, and document everything along the way. Every-
one ought to be involved – property managers from each
property should buy into their budget and provide con-
structive feedback.
A good example is marketing. As recently as five years ago,
marketing budgets were all print-based, and now they are
almost all digital. Now, marketing budgets need input from
multiple people who can break down the budget into spe-
cific areas like Internet Listing Services (ILS), social media
and print advertising, website creation/updates and SEO/
SEM. Your team for this budget will involve more than just
your marketing director to get a clear picture of what you’ll
be spending on this critical function.
Work with professionals
A September start also ensures the availability of any
third-party resources, such as consulting firms or contrac-
tors, you might be considering involving in your budget
process.
Consultants often provide the direction required to develop
a truly valuable budget. Due to normal late-year planning
processes, the availability of these resources is stretched
thin. Starting early avoids much of the bottleneck.
Our team, for instance, is able to provide a deeper level
of value when involved in future-year planning earlier than
later. We’re able to dive further into the market data, as
well as get to know your team and stakeholders and un-
derstand the inputs of the project that much better. As a
result, we derive intimate findings to challenge and grow
your business in the year to come, including strong perfor-
mance targets, baselines for property management re-
views, income and expense projections, and expectations
for capital improvement projects.
The value of additional outsider insights is often incalcula-
ble, but even with a strong strategy, the budgeting process
is generally daunting. That’s why you’ll always want to put
as many opportunities in place as you conquer your an-
nual budget, including time, research and your people.
Altogether, a third-quarter start gives every opportunity a
chance to flourish, giving you exactly what you need as
you wind down the year.
There will always be changes
If you’ve been an owner or property manager for more
than a few years, you’ll know that everything can change
at the drop of a hat. Occupancies alter unexpectedly,
unforeseen improvements become necessary, and stake-
holder interests no longer align. For myriad reasons, our in-
dustry is fluid.
So, what happens when things change in the fourth quar-
ter? Your budget changes too! Just as you let your Septem-
ber figures percolate through your budget’s first draft, you’ll
have the ability to update your budget again as the year
winds down, letting your new numbers percolate just the
same. From there, simply update the already agreed upon
budget in a quick and efficient manner.
When we talk to property managers who begin the process
early, they tell us they notice tremendous improvements in
efficiencies and performance. Consider getting started
soon on your budget for next year, and surprise yourself
when you see how well it runs for you too.
Download free budgeting tools including a budgeting
timeline from our website and call me to schedule a free
consultation to get your 2019 budget started today.
ABOUT THE AUTHOR
Mike Ballard is a partner at Ascent Multifamily Accounting and has
worked in the real estate and accounting industries for almost 30
years. At Ascent, Mike leads the firm’s consulting practice, where
he advises clients on using tax credits and deductions to improve
returns on their projects. He has helped clients secure Section 45L
Energy Tax Credits, New Markets Tax Credits and other types of tax
credits. For more information, visit www.multifamilyaccounting.com.
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