December 18, 2017
    Even in the best of economic times this is what budgeting requires

    TRENDS Attends: TRENDS Finance Live Annual Nonprofit Forecast & Budgeting Review

    By Rhonda Lees, Esq., CAE | 01/07/2016

    When budgeting, even in the best of times, associations need to employ skills, strategy and appropriate use of economic trends to forecast.

    This was advice imparted at the recent TRENDS Finance Live Annual Nonprofit Forecast & Budgeting Review at the University Club in Washington. Speakers at the well-attended event included Daniel Meckstroth, chief economist, Manufacturers Alliance for Productivity and Innovation; Leon Seeman, COO, Yeshiva of Greater Washington; and Eric H. West, a founding partner of West, Lane & Schlager Realty Advisors. Seemann moderated a panel discussion that included Meckstroth, West, Stephanie Murphy, CFO, Air Conditioning, Heating & Refrigeration Institute, and Paul Roetert, CEO, SHAPE America.

    In his presentation on Seemann advised that to improve budgeting models, associations should consider: 

    - bringing everyone to the table

    - starting from scratch each year

    - tracking results and modifying assumptions, and

    - understanding risk tolerance.  

    To budget accurately for the current and foreseeable economic climate, the panel suggested analyzing the economy, the sector(s) affecting your association, identifying what can be controlled and being mindful of the strategic plan. 

    Meckwith indicated that manufacturing and automobile sales will track the general economy and experience moderate growth in 2016 and 2017, but start to decelerate in 2018. He noted that strong consumer demand has largely fueled the economic growth of 2.5 percent in 2015, most of it coming from new workers and their new incomes, however he noted strong deflationary pressures that are spreading globally, such as U.S. drilling technology that drives down global energy prices, and China’s slower growth.  

    Turning to a large item in association budgets, occupancy costs, West suggested a benchmark of approximately 6 percent in relation to overall revenue. 

    He noted that the DC (12 percent), Northern Virginia (14.57 percent), and suburban Maryland (12.79 percent) vacancy rates offer opportunities, especially for associations seeking to enter this space or for those with a few years left on the lease. He suggested that associations exercise bargaining power.  

    Premises near a Metro subway station, with attendant amenities such as housing, restaurants and stores, are attractive for millennials choosing where to work. In addition to location, millennials appreciate the new footprint that includes smaller and fewer private offices, open work space that can be configured multiple ways, collaborative areas including small meeting spaces and multiple conference rooms. Associations can be aggressive in negotiating not only the per square foot rate, but landlord concessions such as free rent and tenant improvements.  

    For those associations that cannot or do not want to move, brokers and real estate consultants can review the charges by the landlord against what was contemplated in the lease, realizing cost savings.  

    By viewing trends in the marketplace, and understanding the relevant sector of the economy, associations can analyze expenditures and take advantage of current opportunities, especially in the real estate market.

    Association TRENDS