Habit #5: Effective management committees implement smart financial control
In this blog post, we are going to emphasize on the fifth habit of effective management committees of implementing smart financial control. Smart financial management is the key to success for any management committee. In our earlier blog post, we talked about Habit 4: How effective management committees are highly disciplined. Read more…
Pointers for the committee members to practice smart financial control:
Treasurers need to do more than just signing cheques – In most of the apartments, the role of a treasurer is restricted to signing cheques and issuing receipts. This is not the right practice. The role of a treasurer is a very important one and both the committee and treasurer has to understand that. As a treasurer, ensure you have a budget in place at the start of the financial year. There may be undue pressure on you from other committee members or residents to spend on various new initiatives but do stick to your budget. Always remember it’s easy to spend but more difficult to stick to the pre-decided budget and as a treasurer if you are able to do that, you are certainly doing a good job.
Do not approve ad-hoc expenses – Committee members or residents always come up with new initiatives and every new initiative has an additional cost attached to it.As committee members spend more time with each other, you develop a certain level of friendship and comfort with your co-committee members. The problem arises when you are not able to say “NO” to a co-committee member for an expense, which is out of your budget. As a treasurer, learn to say no to the ad-hoc expenses, which makes a hole in your budget. At times the treasurers need to be ruthless to spend their finances judiciously. For instance, in one of the apartments, one of the committee members suggested a sliding gate, which would have looked great and would have been easier to access, but the treasurer did not approve the budget for the same. Was it a good decision? Yes, because one needs to understand the difference between “feel good things” vs. “necessities”.
Set a strict approval process for payments – As a treasurer, it is both your duty and right to question each and every expense. Keep a strict check on the new expenses being incurred. Set your budget and set a process for slab approvals for fool proofing the system. Create a rule or mechanism for payments approvals, provide the same to the entire committee and ensure it is followed by the whole committee. Do not go easy on the slab approvals and try going around it. Ensure you yourself follow it for making the entire committee follow the same.
Publish monthly reports on budget variance – Show the same enthusiasm to calculate dues as well as expenses. Most of committee treasurers show a lot of enthusiasm while calculating and collecting the dues or maintenance charges from residents. However, when it comes to calculating the expenses or the budget overflow, one loses enthusiasm and the budget variance calculation is always delayed. Ensure budget variance report is published in a timely manner on a monthly basis. Also, publish the report on how much was the overflow every month. This will help you analyse where exactly did you go wrong and will help you and the committee balance it out the next month itself. Otherwise, at the year end audit, one can only realize the mistake of overspending but will have no time to correct it.
Committees and especially treasurers need to understand that the resident welfare cannot be achieved by overspending on “feel good” things instead spend the resident money carefully and judiciously on the necessities and try to achieve small objectives, which are in-sync with your pre-decided budget. This will lead to a higher level of resident satisfaction.
Do you think the management committee in your apartment complex practices smart financial control? Do let us know by commenting on our blog. Log onto www.apnacomplex.com regularly for the post on next habit of effective management committees.