Forecasting and budgeting for property taxes is a crucial part of the financial health of any multi-property portfolio. As one of the largest expenses for owners, occupiers and managers of multi-property portfolios, fluctuations in this liability can have a huge impact on an organization’s bottom line. This is why effective management of the property tax lifecycle, which includes cohesive, accurate and timely budgeting, is so important.
In order to properly forecast one’s property tax expenses, analytics and portfolio information, including historical data, may be required to identify the appropriate trends that can be used for projections and budgeting. This data, along with other factors relevant to future activities (i.e. renovations, demolitions, acquisitions, etc.) can serve as evidence to the forecast process. Unfortunately, for many organizations, assembling and communicating this data effectively can be quite a difficult task because of the numerous data points coming from different systems and siloed teams.
Quite often, the property tax forecast is done by accounting and not the property tax team. However, even the most experienced accounting professionals are unlikely to have full visibility into the entire breadth of the property tax liability. In order to successfully collect and analyze the data, accounting must rely on the support of the property tax team. The process of sharing the correct information among these teams can be a major pain point during forecasting and budgeting season, especially when an organization is relying on spreadsheets to manage this data.
Unavoidably, major questions about data integrity and assumption validity always arise during this process. Especially if the tools being used have no built in audit trail or mechanism to review data sources and the basis of financial assumptions. There are always concerns about effectively collecting and consolidating all necessary data while ensuring that the data is complete and accurate when using spreadsheets. Spreadsheets inherently come with the risk and overhead of multiple versions across a number of departments. Furthermore, understanding the best way for property tax to communicate with accounting and vice versa without duplicating effort is often a major issue.
Essentially, avoiding the annual pitfalls and stresses associated with this process begins with finding a way to bring together the finance and property tax teams. This means providing them with the necessary tools for collaboration and secure data management. Depending on the structure of the organization, it is possible that one team has more responsibility in the process than the other. However, regardless of the division of labour, neither side can work effectively without collaboration.
The ideal scenario is that the business’s property tax teams and finance teams can communicate and share data in real time. Using a system that has the ability to store data and track edits with a live audit trail reduces concerns of data accuracy and completely removes the need to painstakingly track down and consolidate the information from multiple people and departments. Additionally, it provides greater clarity and integrity to the forecasts and trends produced since the assumptions can be easily accessed and validated by anyone with access to the system.
With the right technology in place, the process can be very smooth. Property tax managers are able to input relevant data into one shared system throughout the year that finance can then easily access to meet its accounting obligations when need be. With all relevant information constantly flowing between the two functions, both can perform their duties with confidence and more efficiently. However, without building a closer working relationship, the scope for confusion and potential gaps or errors in pivotal data is frightening.