Common Sense Budgeting Predicting Future Operating Costs

Running a co-op, condo or HOA is a business, and like most businesses, proper budgeting is the key to financial health. Just like businesses, associations usually have two separate yet vitally important budgets. The first budget is the day-to-day budget, also known as the operating budget, which encompasses, exactly as described, the everyday operating costs and expenditures such as salaries, taxes, utilities, insurance and maintenance items. The second budget is the long-term budget, known as the capital budget. This budget is more flexible and is devoted to the association’s long-term financial requirements, such as improving the buildings’ condition, major projects like redecorating or major improvements like a new boiler or elevator upgrade.

Planning each budget requires different considerations, information and research. The good news is that this is not, and should not be, a daunting task. All the information needed to prepare these budgets is readily available. All an association requires is planning, accurate budgeting and forecasting. If your association has these then there is no reason why both budgets cannot be sound and balanced.

Deficit, discretionary spending, revenue, surplus, and debt ceiling are words that seems to be on everyone’s lips these days. As costs of goods and services continues to rise it may appears as if families and businesses alike are approaching their own fiscal cliff. Like Congress, every association faces the same task of staring into the abyss and estimating costs and expenses for the future budget. So what exactly has to be done to accomplish this? There are some very helpful tips to accurately plan budgets and save money by just examining the day-to-day operating expenses, a little research to plan for the future and to looking for ways to cut costs.

Where to Start

According to Carl Cesarano, CPA of the Manhattan-based certified public accounting firm of Cesarano & Khan, PC, one good place to start is to “put together the budget team.” This usually consists of members of the board, the association’s treasurer, accountant, property manager, super and any other individuals with relevant expertise. One cost saving tip is to include any qualified residents. For example, instead of adding to the billable hours of the association’s accountant, consider soliciting the aid of a CPA that may reside in the building. Little ways to save money add up.

Associations and their budgeting teams have the daunting task of framing two budgets: the capital budget and the operating budget.

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