Best Practice: Annual and Mid-Year Budgeting – KWMCAngel

Objective: ensure that market centers are prepared with good data and resources to begin budgeting for growth (defined by profit) for 2024

The Pain Points:

Generally overwhelming
Each region and sometimes each OP have a different way of thinking about a budget
Getting stuck in a “this is how we’ve always done it” rut to just get it done

Regional Resources – Forecast Model

The Forecast Model is the budget worksheet most regions will use or customize and provide to their market centers to start the budgeting process. Your regional leadership will schedule training to help you understand the value of the data entry towards informing your past growth trends and setting up both a reasonable and a stretch goal budget for the coming year. It’s very important that, no matter how many years of experience you have in budgeting, you actively participate in these trainings and this process with your region.

Local Resources – Reports and Information to Gather

When you start prepared with data, as you enter the current year and most recent year’s data into the Forecast Model (provided by your region), you’ll start to see a story develop of what your market center spends and where that spending leads to growth. That’s what you want to highlight when presenting your recommendations for expenses for 2024:

Locate the 2023 budget prep resources to have handy; the template along with the prior year data in those resources may prove helpful.
Have the last three years of December transmitted Income Statements to reference.
Print out a list of all vendors you paid an invoice to in 2023 – this is your starting place for itemizing each account and for playing red light, green light (MREA) - what is paid monthly, what is paid quarterly, what is paid annually, what is offset by agent charges and isn’t really as big an expense as it might seem?
Check with your CPA for the next year’s depreciation schedule.
Leadership employment agreements and rent contract to account for any automatic increases or changes to calculation formulas and date of implementation.

Budgeting Resources:

The budgeting process is directed by each regional leadership team, and they will be your source for templates, models, and due dates.

It’s important to know the official sources of accounting policy and formulas provided by KWRI:

Policy Document	Link	Description
Addendum A of the KWRI Policies & Guidelines: Keller Williams Realty Profit Share Accounting Policies & Guidelines	KWConnect > Resources > KW Culture > IALC & PG Manual	General Guidelines as well as specific requirements and limitations surrounding key expense accounts; these are designed to keep the expense side of budgets in check and in culture.
KWRI Chart of Accounts (US & Canada)	Knowledge Base: Chart of Accounts	List of every KWRI-approved account for AccountEdge and Lonewolf, including both requirements and limitations of those accounts (what can be booked where and sometimes what can’t)
Franchise Agreement	Check with your OP if you don’t have the most recent on file	Standard and possibly unique financial terms as well as training requirements that bear a cost to the market center
Market Center Financials	Course registrants received a physical and/or digital copy of the course manual	Chapter 4: Budgeting, Forecasting, and Goal Setting as well as the ever useful Desk Fees formula to make sure your associate fees are in line with any rent increases (just one example)
Protect Your Profit	Course/workshop registrants can access their recorded class; recordings are limited access for confidentiality of information shared	Deep dive into the Balance Sheet and Income Statement towards improving profitability
MREA – Millionaire Real Estate Agent	On your bookshelf	Model Three: Your Budget Model – while written for the real estate agent business, the same principles apply: Lead with revenue Play red light, green light Stick to the budget

Budget Audiences

In addition to your TL and OP, you’ll also need to be thinking about how to present a budget draft to your ALC Finance Committee and the ALC for their feedback and buy-in, especially if the budget relies on any increases to associate fees or a perceived loss of services if a vendor expense is recommended for reduction or elimination.

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