Focus on better budgeting

Focus on Better Budgeting By The Thinker

Arecent case study at a Gold Coast Strata Title Complex produced savings for 2020 of almost $ 50,000, with levy reductions of around 20% over an 8 month period. A resident manager and a committee Treasurer produced a budget at the start of the year which included some of these savings and others became apparent as the year progressed. Then the Body Corporate Committee dodged a bullet by not accepting a major quote for a maintenance project which proved to be greatly over-stated. So why is it important to continue monitoring spending against budget? There are many reasons, all related to good management. Confidence in knowing exactly what went according to plan, what did not do so and why things turned out differently is the essence of good managing and savings delivery for owners, via better budgets and monitoring of financial performance.

This is the first of a series of articles about Better Budgeting to highlight its importance for apartment owners, across the Gold Coast. Perhaps this can be a wake up call to owners who face the challenge of balancing unpaid volunteer efforts with the paid services provided by strata plan managers. Unfortunately, many bodies corporate pay little attention to accurate measurement of Work in Progress that is not fully billed or reported. Why is that important? It is important because the apparent Under Budget Saving at the end of a given period of months can be reduced or wiped out, by sudden unbudgeted bursts of spending. Furthermore, understanding how expenses can be better controlled is critical to the creation of future budgets with maximum levy reductions. Can we trust financial reporting? It may be accurate as far as it goes, but it often does not go far enough. In the above case study, we mentioned large savings by a body corporate committee. Their ambition continued in their current year Admin Fund Budget designed to lock in the savings previously secured and some others planned. Beating the budget became the challenge for the committee ... please read on. This chart is supposed to show progress against Budget in the 8 months to end October. The problem with this chart is that it may be wrong. Previously we pointed out that all bills for the period may not have been paid. Not only actual bills, but also unfinished unbilled work ... namely work in progress. Everything depends on the quality of the accounting system and the capacity of Resident Managers to track progress of all site activities. Knowing the cost of unfinished work in progress can have a major effect on the green savings column in the chart. In a large complex work in progress could even wipe out “reported” but fictitious savings, or significantly reduce the savings as seen in a chart like the above. Everything depends on the willingness of the complex to obtain accurate reports and the willingness of the reporting to engage in solving this problem. Quality of accounting is everything and without appropriate quality committees can be flying blind in knowing where they stand in producing savings for owners. In our next issue we will discuss the varying quality of accounting software in the body corporate services industry, including the varying willingness of software providers to support owners and committees with reporting improvements, via system changes. We will also be suggesting a major savings opportunity in your systems and reporting. How happy are you with your reporting systems? All owners receive financial statements, and we welcome contact from owners and their committee members who are keen to analyse their Body Corporate results so as to produce savings opportunities. Focus Body Corporate Advisory wishes to help all unit owners understand where their budgets need analysis and improvement ... potentially leading to major savings.

We are keen to work with individual owners and with committee members who are seeking better budgets and bigger savings. Options include (1) a No Savings No Fee agreement (2) a one-off fee for new budget design support (3) a Monthly or Quarterly Fee for help to monitor actual v budget performance.

Article supplied by Focus Body Corporate Advisory Focus Body Corporate Advisory Pty Ltd. Call Amanda or Alan on or an initial free discussion of your reporting software. Website focusbca.com.au Email info@focusbca.com.au Phone 1300 038 219