While changing a key business process can be disruptive, sometimes the cost of staying the same gets prohibitive.

For years, the tried-and-true Excel spreadsheet has been the preferred tool for many affordable housing companies when it comes time to do their budgeting and forecasting. But budgeting and forecasting software is seeing increasing adoption among affordable housing owners such as McCormack Baron Salazar and BRIDGE Housing as they look to automate and simplify the process.

Yardi has had a budgeting and forecasting program for several years, and RealPage rolled out its version, called OneSite Budgeting, in May. RealPage began developing the product in early 2009, a replacement of the company's outdated DOS-based Budget Builder product.

“There are a lot of hidden costs in the budgeting process that people don't think about,” says Ranjeev Teelock, vice president of accounting and budgeting solutions at Carrollton, Texas-based RealPage.

A typical property management company spends a lot of time and effort gathering the diverse data to prepare budget spreadsheets. Headquarters will populate budgets with accounting data and then distribute them to each individual community. The folks on site will then run the rent rolls, lease expiration reports, and unit reports, just to get to square one.

But with a budgeting and forecasting product, companies can pull data from their accounting and property management systems instantly and send them out to the site-level staff, which can then begin budgeting immediately.

The hassle of spreadsheet budgeting also discourages many companies from doing it all over again to reforecast. But a budgeting and forecasting program makes it a painless process. Each month, the monthly forecasted numbers are replaced by that month's actual numbers, allowing users to modify their budgets by plugging in new projections.

“If the property managers see a downturn on their leasing activity, they can modify their assumptions, and the budgeting product will recast what target revenue is going to be,” says Teelock.

Still, the majority of Yardi's Voyager Affordable customers, for instance, still use spreadsheets for budgeting, often out of a sense of tradition. But when all of your accounting and property management data resides in your existing software, it makes a lot of sense to bring budgeting into that fold.

“Spreadsheets are not a tool, they're really just a placeholder. In Excel, there's no interaction with your property management program,” says Mark Livanec, director of Santa Barbara, Calif.-based Yardi's affordable housing sales. “But the key to having an integrated budgeting program is that every charge, every receipt, every payable invoice is in a massive data warehouse. So that data already exists in Yardi Voyager, as opposed to using a spreadsheet that has nothing to do with your day-to-day operations.”

Economies of scale

While both companies offer a simple budget feature in their accounting software that keeps and manages information, the more powerful budgeting and forecasting features, such as modeling, forecasting, and workflow management, become necessary at larger organizations.

Indeed, budgeting and forecasting is more widely adopted by larger companies—those with less than 500 units can get by without it. But as companies get bigger, the need to get a handle on the budgeting process becomes more critical.

Consider Morgan Properties, which manages nearly 31,000 units. After the company more than doubled in size by acquiring the 16,784-unit Kushner Cos. portfolio in 2007, the budgeting process also doubled in complexity.

“We had this monster spreadsheet that had developed over 10 years, and every year it got bigger,” says Jeff Callan, chief information officer of the King of Prussia, Pa.-based company. “We were just copying lots of data out of Yardi and pasting it into more tabs on the spreadsheet. Occasionally, the spreadsheet would just blow up, and everyone would freak out.”

In fact, the all-encompassing spreadsheet had ballooned to 3 megabytes in size as a template, before financial data was entered. The company had been storing its budget in Yardi and using the standard “budget comparison” and “budget checking” functions, which allowed the company to see how its current expenses measured up against projected expenses, for instance. But the Kushner acquisition spurred Morgan to purchase the extra budget and forecasting add-on module.

The biggest process efficiency gained from the budgeting and forecasting application is in reforecasting on the fly. In the past, Morgan Properties would enter all of its budget assumptions and separately compare the actual financial numbers with the spreadsheet, cycling back and forth.

For instance, if the company assumed 20 people would move out of a property in a given year but 25 actually moved out, they'd have to manually compare the numbers to see why its turnover budget exceeded projections. Now, the company can reforecast in real time with just a simple click.

“In the past, we'd have to pull the spreadsheet out, change our assumptions, and add more tabs to track the reforecast,” Callan says. “Now, we can just run the model, and the numbers instantly spit out. That process is now possible, whereas in the past it was virtually impossible to reforecast in Excel.”