What started out as “two weeks to flatten the curve” has stretched into nearly two years of disruption, chaos and uncertainty. Now, as businesses try and rebuild, they’re faced with the added challenge of trying to forecast a future budget based on a recent past that was anything but normal. Not only is the data vastly inaccurate, but at a time when property managers are focused on keeping costs down, it’s no easy feat. Here’s how to overcome some of these challenges and put together a reliable forecast that will help protect the financial future of your business.
Start with a basic framework.
Things right now are complicated enough. To avoid making things unnecessarily harder on yourself and your team, choose a framework that is simple, flexible and will enable you to forecast quickly. This is important in times like this, as such an approach will allow you to go in and re-forecast with ease should things change unexpectedly. Once you’ve chosen your framework, start with a monthly forecast and build up from there.
Consider non-financial growth.
Another way to account for the volatility of the last two years is to also consider quantitative growth that can’t necessarily be measured in dollars and cents. For instance, during the pandemic, you may have lagged in rent payments, but chances are your retention rate stayed high. Compare your growth rate during the pandemic to several years prior.
Once you’ve got two sets of data to compare, ask yourself the following questions:
- Can the change in growth be attributed to the pandemic?
- If not, or at least not entirely, then what else might have contributed?
- Prior to those years, how many doors were you adding, year over year?
- How many doors, if any, would you have to add in the next year in order to recapture your previous growth rate?
This should start to give you a better picture of what your goals will need to be over the coming months.
Compare YoY before making major decisions.
For property managers who are currently in recovery mode, the coming year will likely feature more modest goals than years past. For those lucky few that weren’t significantly impacted by the pandemic, this may be the perfect time to put a more aggressive plan in place. In either case, the goals being set should be justified by a year over year analysis. One particular place to look when crunching those numbers is how well you were able to stay on budget in previous years. This will help you determine whether your goals for 2022 should be more ambitious or reserved.
Evaluate multiple different scenarios.
While the plan should always be to forecast for a successful year ahead, it’s important not to forget possible downside scenarios as well. Consider the various factors that might negatively impact your bottom line, like changes in rent prices and other things that might lead to an increase in delinquencies or turnover. Establishing a plan B enables you to more accurately prepare for possible situations in which you might have to trim the fat and cut more corners in order to stay on track with your goals.
Assess past commitments and goal completions.
While the past two years may have been an anomaly, the years prior can shed a lot of light in terms of how well you and your team are able to shift priorities and successfully achieve the goals that were set. Obviously, if your goals were aggressive, there may have been times when they simply weren’t feasible, but for the most part, your team’s past resolve can help shape what kinds of outcomes you can expect in the future.
Identify variances between forecasts and actual.
Not only is measuring variance important for identifying potential problems, but it’s also a key to establishing realistic future goals. There’s a good chance that property managers looking at their YoY numbers are seeing an increase in variance over the past two years, due to a mandated pause in late and other regularly collected fees. As the year progresses, you can use the tracked variances to adjust your budget forecasting goals. For instance, if your variances are high, you might look for areas to scale back on your more aggressive goals.
Forecasting over the next year or two may be trickier than it’s been in the past, but it’s not impossible. By leveraging the suggestions provided above, and utilizing the custom reporting feature of your property management software, you’ll be able to gain a more accurate view and develop a plan for the future and prepare for any uncertainty that might come your way.