By Cylinda Mobley, Westwind Management Group
I’m a budget nerd, and I freely admit it. Putting together an HOA budget and seeing each month how accurately the projections and actuals fall into place gives me a sense of satisfaction and downright gleefulness. In the coming weeks, this process begins again as I start the budgets for the communities I manage. With so much in the news recently about inflation and its effect on so many of us in our daily lives, how do we factor that into the budgeting process for 2023 and beyond?
Dictionary.com defines a budget as “an estimate of income and expenditure for a set period of time .” I start the budget by projecting the expenses. Only then (IMHO) can the income be projected because you need to know how much money you need to cover the expenses. Let’s roll up our sleeves, put on some good tunes, print out the past years’ reports for actuals vs. budget, and get to work!
The economy is cyclical, and the way I like to factor that in is by using a five-year history of expenses to determine an average and then modify where needed, but in our current market, that may not be enough. We are still being affected by COVID supply chain and labor shortage issues. Many of our industry business partners are struggling to keep staff while still providing the services needed to keep our HOAs going. Before you throw your hands up in despair, channel your energies into the below recommendations:
- See if the utility companies are talking about increases for the next year (in addition to what may have occurred in the middle of the current year!).
- Check with your service providers for any increases and fuel surcharges. To retain staff, they may be competing with others and having to offer incentives for employees, which drive up costs.
- Where can your association cut costs? Does it make more sense to look at xeriscaping over the higher watering costs of turf?
- How healthy are your reserves? Has your association conducted a recent reserve study? Are you capitalizing on the inflationary market and investing your funds where you can get the best return on investment? Can you put off a capital improvement until this volatile market slows?
Putting together a budget shouldn’t cause you grief, but rather provide some relief that you have as accurately as possible created a road map for the association for another year! If you need a good playlist to jam to while you are number-crunching, Sister Hazel is always my go-to! Check them out here: https://open.spotify.com/artist/7m60UAnbgFFNuJbmS6OxTk?si=b5243e8c60d544d3