What’s it like to go through budgeting season at your property? Multifamily and commercial companies have made great strides in modernizing operations, marketing and accounting practices in the last 15 years, but most operators still prepare budgets today in the same way that they did decades ago. You don’t use your cellphone from the ‘90s. Why are you still using Excel to do your budgets? In this post, we’ll discuss how to bring the multifamily budgeting process up-to-date.
Excel is, of course, a wonderful tool, but it isn’t designed specifically for the purpose of budgeting, which in rental housing, is a multi-stakeholder, multi-step process. Busy property managers are assigned the task of completing the budget for a given community. A controller or a senior executive will prepare the formats of the spreadsheets for multiple properties. Regional managers will provide next-layer approval on the property manager’s work, which is then subject to executive review.
Start with the right data
Property management companies know that the challenges of budgeting are largely to do with the process of obtaining data of the right quality for something as important as a budget. We estimate that 90% of property managers are using Excel. Some have a way of uploading data into Excel, but most companies still have to key their budget data into their spreadsheets.
Manual entry is, of course, time-consuming, but the problem is compounded by the fact that critical data resides in multiple accounting, leasing and property systems. This forces time-strapped operators to juggle different data sources and formats in as they prepare their spreadsheets. The risk of errors, rework and – worse still – inaccurate budgets should be a concern to management companies.
Imagine, for example, budgeting for marketing – one of the more challenging items on any property’s budget. A good approach might be to look at the previous few years of advertising spend on the general ledger. That data exists within most organizations, but it is hard for most companies to obtain, requiring operators to pull detailed reports and then process them, manually, in order to incorporate the information into an important decision process.
In the simplest of portfolios, the toil of pulling data together takes management time and attention away from more value-adding activities like analysis and decision-making. Now imagine a portfolio that contains multiple asset types. Senior living assets, for example, are typically budgeted by service level. Budgets for student assets may be budgeted by the bed. For affordable, units budgets may be set by program or tax credit.
Where portfolios contain multiple of the above asset classes, imagine the time and effort involved in designing, populating several different Excel-based budgeting processes.
Property budgeting, simplified
The good news is that there are much better ways to handle the property budgeting process.
By replacing Excel with a dedicated budgeting tool, property management companies are solving the two key issues with their Excel-based processes: data acquisition and budget preparation.
Companies are upgrading their budget processes with software that pulls data directly from the systems that generate it (accounting, property management, etc.). By making this change, we eliminate the need to type in or freshen data.
Instead of manually preparing spreadsheets and manually uploading data, operators can simply go to one place, set up parameters, and have the technology push all of the data out. The data is then instantly available for budgeting, saving a lot of time not only in data entry but correcting things and fixing formulas and gathering data. The solution pulls in the data from other places. We will show how processes that used to take days can now be executed in minutes.
And because the data is being pulled easily from source solutions, it makes it easy to budget in different ways. Dealing with the mixed asset-type portfolios, as described earlier, becomes a simple task of adjusting parameters rather than having to create multiple spreadsheets and processes. Drilling into specific unit types and other value-adding analysis is also rendered simple by the process and technology of property budgeting software.
Plugging numbers into spreadsheets is a process straight out of the ‘80s. So why continue doing it time and again?
Discover a multifamily budgeting software solution flexible enough to handle the unpredictability of property ownership.