In this article 5 topics
The electrical system in the parking garage has collapsed, the energy-saving bulb installed in the lobby burns out every two weeks, the irrigation system is swallowing the budget set aside for garden care, and lately you find yourself spending far too much on routine cleaning of the complex. If you manage your retail center's budget well, you will not be able to prevent all of these faults, but you will certainly be able to manage your budget in a more correct, smarter and better-planned way.
What does that look like in practice? Our experts offer a behind-the-scenes look at budget planning for retail centers. Come learn from the best how to do it right!
You carry a lot of responsibility on your shoulders
An office building maintenance company carries a great deal of responsibility. The annual budget is a business plan in every sense, and its overarching goal is to forecast the project's income and expenses for the year as accurately as possible. Budget planning is a management tool that helps you understand how much you will spend, on what, where you can save and how to prepare for the unexpected (spoiler: the unexpected will come, every single year).
To a large extent, setting the budget correctly is one of the most significant indicators for predicting the success of the project's day-to-day management, and it is the basis for setting financial, management and operational goals for the entire complex.
What does it require of you?
Examining trends, price changes and alternatives, comparing prices, sharpening your negotiating skills, and in short, getting down to the finest detail while also seeing the big picture, with one goal: staying within the budget you set at the outset and achieving sound budget management for the complex.
The 4 components your plan must include
So how do you build a budget properly? It all starts with the first and most important stage. Take a pen and paper (or an Excel sheet and a mouse, of course) and write down the sequence of steps for building the budget plan:
- A view from above: Build an initial budget covering every area under your responsibility. Map all the fixed and variable expenses you anticipate.
- Priorities: What matters more than what? Which aspect of the budget is non-negotiable, and what is less important? Also find out what the police require (if there is security on site) and what the insurance company requires in order to meet the terms of the policy.
- A finger on the pulse: Day and night, in any weather and regardless of how many complexes you manage, you must keep full control over what is happening in the project and the money invested in it, in every single line item, even the smallest.
- Adaptation and learning: Over the life of the project, you will discover that even with the tightest planning, there are unexpected elements. You should therefore also allow for revising and improving the budget over time (and next year it will be easier, we promise).
The main types of expenses (and income)
You have made a list and planned the different budget lines. Now it is time to zoom in and understand the parameters included in the annual budget for managing the complex:
- Fixed expenses
Expenses that do not change and stay the same every month, including preventive maintenance and the required inspections of the building's various systems. We divide fixed expenses into the following parts:
- Cleaning and guarding
- Bookkeeping and collections
- Staff salaries (fairly fixed)
- Electricity, water, elevators and insurance expenses
- Annual inspections and service agreements
- Breakdown maintenance expenses
Allocating budget for repairs needed during the year, for systems or facilities that break down or are damaged.
- Upgrades and one-off projects
Every upgrade or one-time project carried out in the complex during the year, or over several years, requires a separate budget allocation.
- Income
Day-to-day management derives directly from the budget available to you: fixed and variable income.
Let's build: managing the budget lines
- Managing income
Divide the total income for managing the complex into two: variable income and fixed income, such as fixed management fees, energy meters, parking fee revenue and the like.
- Managing expenses
Map all the expenses across all the parameters listed above and divide them into fixed expenses, breakdown maintenance expenses, and expenses for one-off projects and planned upgrades.
- Doing the math
Set all the income against all the expenses and check the gap between them.
- Flexibility and cutbacks
For each line, note whether the expense can be reduced and the budget cut, and to what extent (easy/hard/not possible). Then go back over the lines you marked as reducible and set new amounts for them.
- The unexpected
Finally, add two more lines:
- Contingencies (unforeseen expenses): so you can prepare in advance for unexpected expenses as well.
- Changing trends: so you can allow in advance for rises or falls in indices, changing trends or price changes, and prepare for every scenario as far as possible.
Building a budget for a new project
If you are a retail center management company managing a project for the first time, or the proud owners of a new office complex, every new project will require you to invest a larger budget in initial, one-time expenses, so a slightly different approach is needed. It is important to stress that in this case, all the lines listed above still apply, but they are preceded by a line that sets the budget for one-time expenses, which must be kept separate from the ongoing budget.
