Smooth Budget Planning for Your Association

Your association has a budget? If so, how is it prepared? Is it even followed? Here, we offer tips for creating a budget process that works well for most associations.

 Learn the basics first .

Begin the budget process by understanding why the budget is important. Apart from the obvious advantage of creating a well-run association with a solid budgeting process helps to protect the value and marketing of its partnership units. Without it, the creditors may be unwilling to lend for the purchase of a unit or association, and buyers can feel overwhelmed and leave because they do not want to accept the consequences of bad decisions in previous years.

Then make sure your board understands and follows some basic principles:

Their fiduciary duty requires coherent planning, implementation of standard business practices and, where appropriate, the mandates of the law of your state.
You can not achieve fiscal security and structural stability in a single cycle budget.  A model from three to five years works best.
All decisions should be based on objective, funding capacity, the benefit of the association, and adjustments for uncertainty, which should be formed by consensus.
Always have adequate reserves, which is similar to insurance, underinsured and not their building. Allow adequate reserves to extend over any uncertainty and cost of repairs and replacements for a certain time.
Special Contributions are not intended to cover items that are usually capital reserve items. If you are going through a special assessment or a year’s time to increase their ratings, that is probably not prepared for an emergency, either.

Be smart and conservative.

Most of the cost of service and contracts, public services and the economy are unpredictable. Couple that with the occasional uncertainty of emergency and the fact that many small and medium under-assessed and under-reserved associations, and the board has to be conservative in their projections.

For example:

Base revenue in accounts receivable evaluation only. Everything else is speculation.
Adjust the projected cost of their association to reflect current economic conditions, not what they expect the economy will be in the next year.
Operating funds from the project will remain at the end of any year must be between 10-20 percent of annual assessments of their association. In addition, you should not consider the quantities of dollars available to prepare the budget for next year.
Provide a basis for the insurance deductible.

Looking for savings.

Cost containment is not easy, but if the Board of Directors takes routine action, this will produce savings. Have at least a year’s annual assessment in a safe place for all buildings, regardless of size. We also have a Reserve study or general inspection conducted every three to five years to match his three-to five-year budget plans.

Project cash flows for the year on a monthly basis. That will allow you to protect against shortages during periods of increased spending of the association. Think about energy efficiency. Whenever possible, replace old equipment with energy efficiency solutions that will cost less and offer a substantial reduction in time.

Remember, as board members, you are held at a [high] standard when handling and making decisions on funding of the association. A good budget stabilizes finances, maintaining quality of life of the owner, allowing for continuity of services, and minimizes the chances of the unexpected short-falls.

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