Steps to Creating a Budget
Creating a budget for a facilities Management department is not an exact science, but taking the time to understand spending trends and budget for the future is critical to proactive maintenance strategies. To do this, there are nine steps to help get control of the facility budget.
1. Talk to Finance
Finance directors will have a budget range in mind for the facility management department. Talk with them before the process starts to see if any large increases or decreases. During budgeting season, finance will be the biggest help in answering questions about how the organization approaches spending and budget development
- If new to an organization or position, remember to ask
- How does the budget proposal process work? What are my deadlines?
- What should I have prepared and what types of deliverables does the leadership team need to review?
- What factors will impact next year’s budget?
- What is our budget cycle?
- How do I account for capital improvement costs?
- How often are budgets reviewed?
- How do budget amendments work?
- If I have questions or want to talk to someone about my department’s budget, who should I connect with?
2. Research Past Spending
The easiest way to forecast next year’s spending is to look at previous years, including everything from staff time to office supplies. Get the full picture by connecting with a supervisor or finance director, as they should have records of:
- Staff wages
- Facility Maintenance Costs
- Technology and office-related expenses
- Repair, replacement, and alteration expenses
- Capital improvement projects
Ideally, these records will be available for the last five years since capital improvement projects, staffing changes, technology rollouts, and other one-time costs can artificially inflate budgets; for reference, the two largest expenses are typically energy costs and staffing,
3. Budget for Staff
Staff budgeting is the most consistent and predictable factor of a facility management department. Employee wages and benefits will typically remain static, and turnover does not usually disrupt the forecast. The most ambiguous variable is the amount of overtime hourly employees will document, sometimes over time can be predicted if a certain season or event is associated with more work and funds can be set aside, or a facility manager can typically work with their finance team to reallocate funds to cover this unexpected cost.
4. Identify Future Facility Needs
Budgeting for future facility needs is done with a condition assessment. These reviews can be performed by an assessor or building inspector, and they typically provide a report that defines a building’s current state in terms of age, design, and construction method. The data that is collected from the inspection should be immediately imported into the facility’s facility management software.
- Specifically, these reports should include:
- Documentation of structural problems, including photos
- Documentation of compliance concems, including photos and recommendations
- Condition reports of assets, including photos
- Forecast of what assets will need repairs or replacement in one, five and 10 years
If a third-party inspection and condition assessment is not a possibility, the facility maintenance team can also do an internal inspection with the help of a facility management software. Using the facility management software, teams can:
Delegate Inspection Tasks
Split the workload of performing inspections between employees with work orders so they understand what assets they should be inspecting Internal inspections can be time-consuming for teams, but work orders make communicating the process more streamlined.
Map Asset Condition with Pins
Technicians can change the color of asset pins to reflect their condition. For instance, assets in good condition can be tagged with a green pin. If the asset looks like it will need to be repaired or the assets condition indicates it will need attention in the next five years, the pin can be turned yellow. If it needs immediate attention or to be replaced in the next year, it can be marked red. This visual assessment can be supported with photos and linked back to a specific asset pin.
Track Repairs and Degradation
In an ideal world, all budget proposals would be approved, but that does not always happen.
When the budget for projects is approved, schedule work orders to complete the project, such as when to start requesting quotes, when the repair will take place and any internal inspection notes. If the project does not get funding, track the degradation of the space or asset so it can be easily communicated in next year’s budget meeting Photos can also be taken and any relevant notes can be linked to the asset.
Store Inspection Reports and Proposals
Inspection reports are valuable to short- and long-term facility planning. Associate these assessments and proposals to a specific asset in the facility management software for easy reference.
5. Get Quotes for Repair, Restoration, and Alteration Projects
Reach out to the facility’s preferred vendors as documented in the facility management software, and have them submit an estimate for assets and spaces needing repairs, restorations, and alterations, ensuring a more accurate forecast. Use these estimates as a baseline for future requests for proposal leading to overly-inflated repair and project costs.
6. Planning for Unexpected Expenses
Planning for the unexpected seems like an oxymoron, but it is critical in facility management. The best way to anticipate these costs is to create a reserve maintenance fund in case of for emergencies.
Typically, this will be categorized under capital projects, as can be seen in the budget template. If this the fund is not used to pay for unexpected expenses towards the end of the year, look at allocating to an underfunded project.
Unexpected expenses are a fact of life, especially when operating a facility. Slush funds or reserved maintenance funds may not always cover those unexpected costs. How do you find help outside your organization? Look to local or state energy conservation initiatives for potential grants and purchase support. Most states, have at least one state-led initiative that offers resources and financial support to businesses looking at sustainable facility equipment.
7. Break Down the Budget
Combine all the research and start writing down each forecasted expense. Be prepared with justification for any cost increases in the form of quotations or condition assessments.
8. Communicate Budgets with Examples
All organizations require different formatting and details in budget proposals. Look at previous facility management budgets and how other departments present their requests before creating your proposal.
Remember to consider the following potential problems prior to submission. Leadership teams do not always understand how the buildings work and what effort is required to maintain the current building state.
Solution: Outline what the team has accomplished in the last year and how it impacts other departments. Things to highlight:
- Department’s employee structure
- Number of work orders and service requests completed last year
- Number of work orders or preventive maintenance tasks deferred due to staff shortage
- Number of square feet/acres the department maintains
- Facility Condition Index
- Major repairs completed and maintenance deferred
- Most budgeting teams do not have a mechanical background or knowledge of required
Solution: Combine pricing research with a story about why the purchase is important. With every request, make sure to include:
- Asset location
- Asset age
- Standard asset life expectancy
- Asset/part/system needed
- Any warranties that could still be active or about to expire
- Estimated replacement cost
- Asset or system’s purpose
- Recurring maintenance or mechanical problems
- Estimated value
9. Share the News
Keep your leadership in the loop with project status reports and a project closeout report. This will help reassure the team that the investment is being used appropriately and the timeline for incurred cost savings are being monitored.