Set Yourself Up for Success with a Strong Budgeting Strategy
Accounting and budgeting are two sides to the same coin. One helps point where you’re going and the other helps you understand where you came from. Analyzing previous spending trends informs how much you’ll need to allocate for each activity in the coming quarters and years.
Just like with your accounting process, having all of your financial documentation available in a single platform is very advantageous. It makes pulling historical reports on cash flow, capital expenditures to better plan for the future and ultimately make your investment more profitable by making it easier to keep track of profits and losses.
It also speeds up the process because you’re no longer having to spend time uploading and downloading excel spreadsheets, especially when you have reports that you need to run on a consistent basis, which is common practice across the industry.
Currently, much of the budgeting focus in the multifamily industry is just on income, which is important, but is only one aspect to consider. When you’re just drilling down on income, you don’t have a full picture of the financial health of the business. Budgeting cash flow is an important addition to the planning process.
Budgeting technology has also lagged behind other industries and makes it hard to collaborate with other team members, departments, and properties. There’s a lack of structure that exists, particularly when it relates to version control, providing access and permissions which makes the approval process more difficult.
Finally, since budgeting is confined to a small window during the year it can suck up a lot of resources, which results in slow load times, which are not ideal because updating and approving budgets is often time sensitive.
Budgeting best practices to consider
It might sound cliche, but when it comes to budgeting, if you fail to plan, you plan to fail. Since we don’t want any of you to fail, here are some budgeting best practices we’ve seen work for our customers.
1. Always be tracking. First and foremost, having access to historical data about previous years spend and previous years budgets is a must. The more information you have to draw from the more accurate and successful your team will be when projecting future needs and building out a budget.
2. Stay connected with interested parties. In many multifamily operations, the budgeting process is very siloed. Oftentimes the right hand doesn’t know what the left hand is doing at any given point in time. When you utilize a solution that allows for collaboration and version control, that isn’t the case. You’re able to maintain consistent contact with interested parties in your org and identify changes in spending needs for the upcoming fiscal year, so there aren’t any surprises.
3.Embrace cloud solutions. Excel has served accountants well for so many years and likely will for many years to come. However, when you consider the need to constantly export and import data from your property management system to ensure you have the necessary data to compile a budget, it makes more sense to create that budget directly in your property management platform that contains all of that data, including previous budgets and last year’s expenditures. Doing so will save your accounting team a significant amount of time while also reducing the likelihood of errors because of missing information.
Learn more about how Entrata helps business improve their budgeting process by requesting a demo today.