Email Mike Email
Residential Real Estate
Sep 15, 2015

Budget Preparations Don’t Have To Be An Annual Headache

Sponsored Content provided by Mike Stonestreet - Co-Owner/President, CAMS (Community Association Management Services)

It’s that time of year when board members and financial committee members convene to start the annual budget preparation for their property owners associations. Setting a budget can be an intimidating, time-consuming ordeal. Our goal in this article is to offer some insight and a list of best practices that have facilitated our success.

Following a step-by-step process for budget preparations or hiring a professional management company can prevent many problems from occurring. If an association has a professional management company, it is typically the role of the community manager to prepare a first draft of the budget. In some cases, however, board members, financial committee members or members of both groups work together to prepare the budget for the community manager to review and comment on.

For most property owner associations, the budget year runs with the calendar year. Before an attempt is made to project expenses, it’s important to compile detailed information about the current and prior years’ operating expenses. This will ensure that an accurate analysis can be performed. In addition, governing documents need to be reviewed to determine the responsibilities of the property owners association. Contracts should also be reviewed to assess whether automatic increases are included or if they will need to be renegotiated during the upcoming year.

Involving the vendors who provide services to the association will make the budget preparations run more smoothly. Whether it’s a landscaper or pool cleaner, they will feel more accountable to hold expenses within the budget during the following year if they are involved. 

An essential task is to ensure that reserve contributions are sufficient. It is highly recommended that a professional study be conducted to ensure the association is reserving enough funds each year to meet expenses and prepare for the future.
Contacting utility companies to verify if any rate increases have occurred or if there are any on tap for the following year is an easy way to take some of the guesswork out of preparing a budget. Many of the costs required by governmental agencies for obtaining permits and inspections are easy to plan for, since they are usually identified months before the beginning of a calendar year. These costs include routine inspections and permits for elevators, pools and backflow prevention valves.

Budgeting for bad debts is often overlooked. Budgets are typically based on receiving payments from all the members; thus if payments to an association are delinquent, there may not be sufficient cash to pay expenses. Allocating for bad debts will keep the budget balanced when delinquencies exist.

It is recommended to have contingencies included in the budget. Economic variables such as inflationary spikes can exert a profound influence. In a condominium or townhouse association that has a master insurance policy, insurance is often one of the largest expenses. The insurance agent should be consulted on expected rate changes as part of the budget process.

Once the budget has been drafted and adopted by the board of directors, it is submitted to the membership. The approval process may differ on a variety of factors. For more insight into the process, please visit the CAMS website at www.CAMSmgt.com.

Mike Stonestreet is a 26-year veteran of the professional HOA management industry who has achieved one of the highest education-based designations in the field, that of Professional Community Association Manager (PCAM). Community Association Management Services (CAMS) has been a leading association management company since its inception in 1991. CAMS is a trusted provider of management services for more than 265 associations throughout North Carolina, South Carolina and Georgia. To find out how CAMS can benefit your community, call 910-256-2021, email [email protected], or visit www.CAMSmgt.com.

Other Posts from Mike Stonestreet

Cams300pxx250pxblockadjune2018[1]
Ico insights

INSIGHTS

SPONSORS' CONTENT
Hewet60

Leadership Is Getting From Knowing To Doing

Ron Hewett - Academy Leadership
Carolinemontgomery4

Businesses Need To Take Coronavirus Action Today

Caroline Montgomery - Adam Shay CPA, PLLC
Drewsmith copiersplus headshot

Keeping Your Office Equipment Sanitized

Drew Smith - Copiers Plus

Trending News

New Tenants Announced For Military Cutoff Development

Cece Nunn - Mar 30, 2020

Local Businesses Respond To Stay At Home Orders

Christina Haley O'Neal - Mar 30, 2020

NHMRC Seeing Cash Crunch Over Coronavirus

Vicky Janowski - Mar 31, 2020

WORKING THROUGH IT: Pet Supply Store Embraces Change

Christina Haley O'Neal - Mar 31, 2020

With Travel Volume Down, ILM Adjusts Operations

Jenny Callison - Mar 31, 2020

In The Current Issue

Cashing In Wellness

Wouldn’t it be nice if, after finally running that 5K you have been preparing for many months, you not only get the reward of accomplishment...


Viral Void

The coronavirus concerns bring Cape Fear region to a standstill....


MADE: Hooking The Fishing Market

Eastern Metal Works Inc. is a wholesale manufacturer that designs, develops and makes marine tools and equipment for recreational and commer...

Book On Business

The 2020 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2019 Health Care Heroes
August 26, 2019 Power Breakfast: A Healthy Sale?
2019 WILMA Leadership Accelerator
2019 WilmingtonBiz Expo Keynote Lunch - CEO, nCino, Pierre Naude`