It’s that time of year again: budget season! Amidst the joy and excitement of planning for holidays and family gatherings, you need to be making financial plans for your portfolio for next year. While it can be a hectic process, it’s one that factors largely into the performance and success of your properties in the months ahead and impacts your long-term strategy and goals. Unfortunately, it’s also a process that can be very time-consuming, easily taking anywhere from one to three months to complete, and sometimes even longer. But with data management technology and the right systems in place, this budget season can be largely automated, accelerated, and stress-free.
To learn more about how to effectively plan at the beginning of the budgeting process, download our free checklist!
Aligning Business Operations with Strategy
Budget season means that your core responsibilities are further strained by additional financial work during an already hectic time. But don’t let that tempt you to make a budget just so that you are crossing the t’s and dotting the i’s and then file it away and never look at it again.
Your budget helps you to align business operations with strategy and enables you to compare your actual performance to your projection, as it relates to income and expenses. These insights allow you to create performance targets for property managers, develop your own baseline or benchmarking for property management reviews, and maximize profitability.
How Can Data Management Technology Help?
Forward-thinking commercial real estate (CRE) firms have already found that technology can provide a huge lift in regard to budgeting. In fact, a 2019 study suggests that 4 out of 5 CRE professionals think that using technology makes budgeting season easier. With software such as Lobby CRE, you will be able to automate and streamline many of those manual tasks that typically consume the bulk of your valuable time. As a result, the budgeting process will be faster, as well as more streamlined, accurate, strategic, and timely.
Below are just a few of the ways that data management technology can impact your budget season.
Data is more accessible. According to a survey by PWC, 55% of businesses have data silos slowing them down; IBM puts that number closer to 80%. In either case, there’s a good chance that this issue is impacting your firm. That means you will encounter challenges when trying to locate key data points and metrics to inform your budget strategy.
A tool like Lobby CRE collects the data, pulling it from unique third-party sources and systems (such as your property and lease management systems), standardizing it, and storing it in a single location for you to access and navigate. Data collection also makes your information more searchable, so you can quickly find exactly what you are looking for, when you need it the most.
There is more data to pull insights from. Before you start inputting numbers, you will want to do your research. The commercial real estate industry relies on data for pretty much every decision throughout the lifecycle of a property. And there is certainly a lot of data available when you consider you have management systems, CRM, forecasting tools, survey tools, market data, and even spreadsheets and email. But with this volume of data and Excel as your main method for data analysis, you end up missing out on a lot of valuable insights. Gartner refers to this situation as ‘dark data’, or information that is collected, processed, and stored but then not used for any other purpose. IDC suggests that up to 90% of data falls into this category.
Asset management software like Lobby CRE collects all that data into a single source of truth and enables you to track dozens and dozens of key metrics that can provide valuable insights. For example, consider how we still don’t know what next year will look like with regards to the economy. You can look at your occupation rates, turnover, and delinquency this year and determine whether you might need a larger marketing budget and more leasing agents to fill vacancies. Or perhaps with more tenants working from home, you need more maintenance staff to keep up with work requests.
Forecasting is more accurate. When you are creating your budget, it isn’t just for the month or two ahead — you are budgeting 12 months out and need to anticipate and account for every dollar in 2021. Further, your budget is essentially your prediction for what will happen in the upcoming year. How will changes in the market and economy impact your firm, your tenants, your competitors, and new opportunities?
By combining data from disparate sources and analyzing historical performance and trends, software like Lobby CRE can help you make smart, informed projections about revenues and operating costs. You can also compare your numbers to market data to determine how your properties stack up and where there is potential for cost savings.
Updating is easier. When you rely on Excel, spreadsheets, and fragmented data, it can take you months and hundreds of hours to create your budget. That also means that you need to start the budget process months before the year ends or, in other words, a quarter short when you don’t yet necessarily have all the data points. But with technology putting the data right at your fingertips, you can have current, real-time info and can fine-tune the budget right up until the end of the year.
How Can I Get Started?
A budget is a valuable tool to effectively manage your properties and a reflection of your priorities and objectives. By properly leveraging your data, you can make informed decisions about the year ahead, maximize profits, and minimize risk. With the right technology in place, you can quickly access meaningful info, gain valuable insights, and streamline the budget creation and approval process. And if you don’t already have tools in place, now would be a good time to consider building technology into next year’s budget!