Facilities Check List
Practical, step-by-step guides for the busy FM
November 1999
Monitoring the Budget
Budgeting and setting priorities go hand in hand in most companies. A companyÕs budgeting process is the most visible indicator of how priorities are set. Budgets indicate what a company cares about, because money is often the pivotal issue in business decisions. Besides priorities, the manner in which a company prepares its budget tells much about its decision-making process, influential individuals, and other key issues.
There are several types of budgets developed in most companies, and the facilities manager should understand the basic characteristics of each of the following types.
Operating budgets are financial plans for the expenditure of funds for anticipated needs during a fiscal year. Such costs include personnel, supplies that are bought and used (such as cleaning supplies), energy costs, parts and materials, and most contracted services (security, food service, child care, consulting fees, etc.).
Capital budgets are financial plans for expenditures of funds on projects, product lines, and facilities that will have residual value after they have been purchased. For example, if a building or a production line is constructed, it has significant residual value for many years after it is purchased. Residual value is also gained with chiller and roof replacements, and other types of energy-saving retrofits. There are many ways of determining a capital cost, but residual value usually outweighs the magnitude of the expenditure. Furniture systems are often considered capital items. Except in government organizations, capital items are counted as assets on the corporate balance sheet, and depreciation is taken against them as a noncash tax deduction.
Expense budgets typically are prepared for individual projects or clients. For example, all costs for a tenant space renovation may be part of an expense budget, so that accrued expenses are tracked and compared against the budget. This ensures better cost control and helps to gain client approval.
The details of a budget, beyond the numbers themselves, offer much information. For example, they state which departments have the greatest incidence of requests for unprogrammed (unplanned) funding and where the money comes from when these events occur. By identifying the largest facilities management customers, and what types of services they request or require most, you get an approximate indicator of the probable impact on facilities management operations.
The facilities manager should review the budget for the way non-mission-critical activities are handled. Consider the following:
This installment of FM Check List is adapted from BOMI Institute’s Fundamentals of Facilities Management course, www.bomi-edu.org/13031.html), a required course in BOMI Institute’s Facilities Management Administrator (FMA) program.
