Budget

A budget is a financial management tool. Budgets for apartment management operations are simple, although they can sometimes appear to be complex. A budget is a set of lists, a list of anticipated revenue and a list of anticipated expenses. It is an estimate based on historical experience and projected changes. A projected change might be, for example, that the occupancy rate will increase in the forthcoming budget year. Categories of expenses and types of revenue are usually identified by a number system. These are further broken into sub-categories. Detailed categorization of expenses and revenue allows us to analyze costs and evaluate the relative value of a revenue source, e.g. a soft drink vending machine.

An apartment budget usually reflects operational expenses and capital expenses. Operational costs are routine expenses, e.g. cleaning and painting an apartment during turnover. Capital expenses are major, e.g. a roof replacement. Capital expenses are defined by IRS depreciation schedules or by dollar amounts.

Budgets are also used for control purposes. Suppose the owners and management company officials agree that each apartment complex should install playground equipment costing $10,000 in the forthcoming budget year. If each apartment complex manager independently decided to install the equipment in April, the company treasurer might be faced with an extremely large bill in May. To prevent that from happening, the various apartment complex budgets might specify the month when the purchase should be made, distributing the cost throughout the budget year.

Apartment management budgets must be somewhat flexible. Historically, the greatest number of apartment turnovers occurs in summer, but occasionally, that pattern is skewed. It is necessary to meet turnover costs whenever they occur.

An apartment manager has first-hand, on-site knowledge of the apartment complex operation. That knowledge is a useful asset when annual budgets are written. The apartment manager needs to keep detailed records of expenditures to justify future budget estimates.


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