5 Easy Tips to Help Managers Improve Forecasting

Budget preparation for 2015 is entering the home stretch for many companies, and soon performance will dictate how well the numbers have been prepared. How well a budget performs is determined by a number of factors, such as changing economic conditions, market behavior, and management practices.

Consistent forecasting helps leadership see a snapshot of where the company is headed, financially and strategically. Revenue and expense forecasting also give insight as to what opportunities – or pitfalls – may lie ahead.

Forecasting is something that many don’t relish. Typically, property management companies forecast as a requirement for an owner or lender.  It is a task that all too frequently is “have to” instead of “want to”.

Aside from the mind-numbing task of understanding what’s in that crystal ball, the mechanics of forecasting can be a chore in itself, if it isn’t automated. Typically, apartment industry forecasts are done using spreadsheets that require substantial preparation time and can often subject to formula errors.  More time is spent preparing the forecast format instead of the analysis of an asset and the financial climate changes that impact the bottom line.

A mistake attributed to human error can be costly.

“Failing to forecast correctly can increase risk of cash flow shortages or missed opportunities increasing rental income based on changes to the market,” said Christine Fisher of RealPage, Inc.

Multiple factors can impact the financial success of an asset including market and crime conditions, effective rent, turnover, repairs and maintenance, utilities and other operational expenses.  Every property is different, but using a sophisticated forecasting tool can be highly effective if used in conjunction with an integrated and well-designed processes, Fisher says.

“Improved forecast accuracy leads to many downstream improvements, not only financial, but also in operations, customer service and asset management,” she said. “When problem areas are identified early, action can be taken to either address problem areas or take advantage of an income opportunity such as raising rents beyond what was budgeted.”

Fisher says the addition of an automated forecasting tool can help property managers see deeper into that crystal ball and better predict the company’s performance relevant to the budget. She offers five tips to make the forecast process easier:

Begin with clean, accurate data

Starting with the right numbers to identify trends and determine a baseline is essential. If data is not truly representative of actuals or realistic projections, the forecast won’t work.

Access data seamlessly and easily

Accessing data easily and quickly speeds the forecasting process. The ability to easily capture data and import it into the forecast tool enables modifications to be made and data stored with ease. Flipping from one spreadsheet to another and, in some cases, manually copying data, slows the process.

Track performance to plan for future

The ability to easily track prior performance is critical to forecasting accuracy, and that’s where tracking software helps. For example, when projecting energy expenses, a detailed, accurate overview of previous utility bills will enable the forecaster to pencil in more realistic numbers.

Collaborate through web-based sharing

Tapping into the web for data and sharing it among business groups can speed along the forecast process. Imagine the difficulties of juggling manual spreadsheets between properties hundreds of miles away. Empowering a web-based tool that enables access with your peers can ensure the right forecast is made.

Adjust for seasonality

Keep in mind change of seasons and how they may affect expenses and revenue. Water consumption and expense in the summer months is typically higher than in the winter, so forecasting high water bills in October based on a previous three-month trend may not be a wise idea. Compare performance to the same period in the prior year.

Forecast accuracy is important for short-term operation decisions and making and long term performance prediction, Fisher said.

“Forecasts can allow apartment managers to identify where profits may be hiding by closely examining property past performance and challenge them to identify what operational or rent influencers can be adjusted to improve financial efficiency.”


(Image Source: Shutterstock)


Contributing Editor, Property Management Insider
President, Ballpark Impressions, LLC

author photo two

Tim Blackwell is a long-time publishing and printing executive in the Dallas/Fort Worth area who writes about the multifamily housing and transportation industries. He has contributed numerous articles to Property Management Insider, and worked as a newspaper reporter in the D/FW area. Blackwell is president of Ballpark Impressions, and publishes the Cowcatcher Magazine. He is a member of the Fort Worth Chapter/Society of Professional Journalists.

Follow PMI


Property Management Insider is brought to you by RealPage. Learn more.

 

© RealPage, Inc. All trademarks are the properties of their respective owners. 1-877-325-7243 | Terms & Conditions | Privacy Policy | DMCA Notice | Sitemap