Reduce Variable (and Fixed) Costs Achieving Big Savings by Reducing Small Expenses

All board members should be involved in the budgeting process of their building. However, board members come from a wide array of professional backgrounds, and often lack experience managing large budgets and do not know how to effectively cut costs. Andrew Hoffman, principal of Hoffman Management in Manhattan, and Ted Procas, chairman of the board of the Association of Riverdale Cooperatives and executive board member of the Council of New York Cooperatives and Condominiums (CNYC), offer many insights into ways that costs can be reduced–not just the costs that are traditionally considered variable, such as supplies and maintenance, but also costs that most people consider fixed, such as labor and taxes. In fact, Hoffman says, "There is no real difference between variable and fixed expenses."

Procas believes it’s important to "alert people that as board members they can have an impact, and to give them an appreciation for how important it is to look at all areas of the budget."

By carefully examining line-item expenses, boards can save thousands, even hundreds of thousands of dollars. It is therefore crucial for boards to monitor their daily expenses. Hoffman says that in addition to reviewing line items on a monthly basis, board members should be proactive in ensuring that they pay fair prices for supplies. "Take your bills to the local hardware store and price things out. You should be buying supplies at wholesale prices. If you’re paying retail prices, you’re paying too much."

It is also important for boards to involve their superintendents in day-to-day budgeting and to regularly go over building inventories with them to ensure that the correct quantity of supplies is ordered. "Lots of buildings have supplies that have been sitting on the shelf for three years. It’s more cost-effective to buy a smaller quantity, why let stuff sit on the shelf?" Hoffman asks.

There should also be a logbook for all maintenance workers to sign as they enter and leave the building. This enables the board to monitor the labor costs of building repairs. "All too often, buildings get bills where both the ‘time in’ and ‘time out’ boxes are empty. There’s nothing worse than getting a bill from the plumber for three hours and realizing that you have no idea how long he was actually there," Hoffman says.

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Comments

  • Energy can be one of the biggest and most volatile variable expenses condos face. Switching to solar (either by buying a solar power system or even just leasing one) immediately reduces those expenses and converts them to fixed ones. There are a myriad of other financial benefits--tax breaks, accelerated depreciation, increase property values, etc. that make solar an extremely attractive option. More info on the economic benefits can be found on the EnergySage.com web site. It's definitely worth a look.