Budgeting and Forecasting: How to Use Yardi AB&F
It’s August 2022, audits have been completed, the year is more than halfway over and now it’s time to start thinking about a Q3 Reforecast and 2023 Budgets!
In today’s post, we will take a close look at how Yardi Advanced Budgeting and Forecasting can help you with your financial planning for 2023 and beyond. This Yardi module can help you automate many of your processes and access up-to-the-minute data on the financial status of your properties and operations.
If you want to get the most out of your software solution and create the most robust and accurate financial plans, read on to learn how.
Using Yardi Advanced Budgeting and Forecasting
Yardi’s Advanced Budgeting and Forecasting (AB&F) module is one of our top tools of choice for financial planning in the real estate industry. It helps you to save time, improve forecasting accuracy, eliminate errors, and build flexibility into your budgets and forecasts.
Yardi AB&F is fully integrated with Yardi Voyager the core accounting system, and each year you create a new model property that starts you off with your existing tenant data to become the basis for your rent roll. Then you edit your rent roll and layer in general or specific leasing assumptions.
Those general assumptions are market leasing assumptions (MLA’s) and allow you to create a scenario based on probability of renewal, estimated downtime of the unit, and what the general terms would be for rent, tenant improvements, commission, etc. The market leasing assumptions also utilize inflation tables if you want to utilize the model for a multi-year forecast or DCF valuation.
The tool also utilizes multiple methods of forecasting and sources of forecasting data. These include making use of prior years’ data while taking inflation into account, spreading expenses out using seasonal schedules, and projecting expenses based upon relationships between various accounts.
Yardi Advanced Budgeting and Forecasting creates a model commercial property, allowing you to test the financial impact of various possible outcomes (such as tenant renewals and early terminations) without affecting the unit and lease records for the actual property. This enables you to test-run “what if” scenarios across an array of variables and make more considered and intelligent financial decisions as a result.
If you use Yardi and are not yet making use of this module or using it to its full potential, you are missing out on a key component of the tool’s functionality. In the following sections, we will explore the various ways you can use it to save time, ensure consistency, and create repeatable and replicable systems.
Budgeting and forecasting is a laborious and time-consuming task. When you have many competing demands on your time, it can be tempting to rush through the process and cut corners. Yardi Advanced Budgeting and Forecasting can save you time without compromising on the quality of your budgets and financial forecasts.
The AB&F permits multiple users to work on different parts of the budget at the same time. To do this, enable the Check In/Check Out functionality and use Account Trees to check out either the revenue or expense general ledger accounts. If multiple stakeholders have input into the budget and forecasts, it becomes easier to collaborate. You can also use the Workflow system to see the status and progress of every user’s work as you go through the budgeting process.
Yardi AB&F allows you to save time by creating budgets and then running functions in bulk across your entire portfolio. This increases the time you’ll have available for your budget review, enhancing the overall quality of your budget and giving you additional opportunities to eliminate mistakes.
The Rent Roll function gives you quick access to commercial and residential units and tenant data created using the model property system, which can then be edited to create more accurate forecasts. You can then use the Roll Up function to view the individual property budgets that make up your overall budget.
Using a high-quality software tool like Yardi Advanced Budgeting and Forecasting helps provide consistency throughout your budgets and forecasts. This is particularly important if you manage multiple properties in a large portfolio. A lack of consistency in your processes can result in large discrepancies in the final budgets and forecasts.
Transferring Totals and Making Updates
Using the Transfer Totals from GL (General Ledger) function, you can input historical data from previous years. This is one of the best ways to predict future expenses. Specify the parameters for the data you want to pull and how it should be treated in future budgets and use the Budget Selection tab to specify which budgets the data relates to.
You can then use this function to project expenses for multiple budgets at once. This ensures that functions are run with the same standardized parameters across your entire profile, reducing the likelihood of manual errors.
Of course, you can also amend those projected expenses manually to account for specific changes you expect in the upcoming year. You can make use of a range of useful formulas within the system to increase the accuracy of your forecasts, and if you need to make multiple adjustments to expense accounts at once, this is where the Excel Copy/Paste function comes in. This allows you to import multiple lines of data into Yardi AB&F with just a few clicks, updating all the relevant budgets at the same time.
Creating Formulas and Forecasting Models
Forecasting models allow you to create a formula and then apply it to multiple revenue or expense accounts. Models can be based on various forecasting scenarios such as vacancies, fee changes, and rent increases.
You can then include or exclude elements of your model as needed each time you apply it to a specific budget or property. Again, the idea is to create consistency while also allowing flexibility to account for the many factors that go into accurate budgeting.
Batch processing allows you to bundle together those tasks and reports that you need to run on a regular basis. Simply select the appropriate property or budget attributes. You can save time and system bandwidth by running intensive and time-consuming tasks through the Task Runner after working hours.
Using Function Groups
Function groups are lists of forecasting functions that AB&F will run in a specific order in Task Runner.
For example, say that your budgeting process includes modeling expenses, forecasting rental revenue, and forecasting management fees for each unit. Using the function groups capability allows you to run this same set of tasks for your entire portfolio with just a few clicks.
Using batch processing and function groups allows you to quickly create quarterly reforecasts without needing to waste time re-entering formulas and parameters. This not only streamlines your processes but also, again, ensures consistency across your portfolio.
Need Further Support?
If you need help with your budgeting and forecasting for 2023, get in touch with one of our expert consultants. We will be happy to discuss how we can work together to help you achieve your business goals with robust budgeting and financial forecasting this year, next year, and beyond.