Property management will have to prepare their budgets for the coming year, and the performance in the next year will be acutely influenced by how well this budget forecast was prepared. The performance of the budget will depend on many factors including management practices, behavior of the market, and prevailing economic conditions.
Forecasting is a special skill that can help property management see how the property is going to perform strategically and financially in the near future. Expense and revenue forecasting also helps to gain insight into possible pitfalls or opportunities that may lie ahead. However, most property managers do not like to open the window to forecasting, and it is usually seen as a required task rather than a useful tool.
Secondly, forecasting can be a major chore if it is not aided by software and automation. Usually, forecasts for apartment properties are done by utilizing spreadsheets, which require quite a bit of preparation and there could be many errors in the formulas used. Here are important points to consider that can make the process of forecasting much easier.
Obtain the Right Numbers
Right in the beginning, the correct data will be required for identifying trends and for determining a baseline. If the numbers do not represent realistic projections then the forecast is not likely to work.
Easy and Seamless Access to Data
Data being the crucial factor in forecasting, it should be easy to access. This will speed up the forecasting process dramatically. Data should be seamlessly available, so that it can be easily captured and imported into the preferred forecasting tool. A magnificent tool will enable storage and quick modification of the data. On the other hand, manual copying tasks and flipping between printed spreadsheets will slow down the process considerably.
To forecast with stunning accuracy it is pivotal to track previous performance levels. The system used by property management should have in-built features for generating reports on different aspects of the property. For instance, in order to project energy costs, you will require a detailed overview of utility invoices, which can be analyzed easily.
Collaborating and Sharing Data Online
Collaborating with professional vendors and business groups can greatly improve forecasting accuracy. In this regard, a striking web-based tool would be very useful that enables quick data sharing. Otherwise, property management will have to handle and send spreadsheets manually, which is cumbersome and slow.
Keep Provisions for Seasonal Changes
Seasonal changes have a resounding influence on revenue and expenses. For instance, consumption of water will be more in summer season, which is going to hike up the water bill. Hence, instead of a yearly average cost, it is better to incorporate seasonal trends, which can improve cost forecasting and the budget for those particular months.
Accuracy of your forecasts will play a major role in not only in long-term predictions of performance but also in short-term decision making of operations. Forecasting is a strategic process that can help property managers discover profitable avenues and potential areas of savings, by analyzing past performances and expense trends.