Preparing a maintenance budget is a challenging task. What should you include in the budget? How do you make sure you don’t forget anything? What information do you need? At first, preparing a budget always seems difficult. So, we’ve reviewed some best practices.
What to include in the Maintenance and Facility Management budget?
One of the main questions about making a maintenance budget is what to include in the budget. How do you make sure you don’t miss anything? First, you need to know what you are going to budget for — the maintenance plan. Then, given the formula we use to calculate total maintenance costs, the maintenance budget needs to include:
- salaries of maintenance managers and technicians;
- costs of hiring new staff, if necessary;
- costs for training and workshops throughout the year;
- an estimate for the price of materials, tools, and parts;
- contracts agreed with external suppliers;
- an estimate for energy costs (especially in FM);
- other expenses, such as periodic inspections, insurance, etc.
To gather all this information, the assets’ history is essential. The lack of this information makes it harder to understand which assets need more attention. Or what are the root causes of the most common breakdowns, so as to avoid costly reactive maintenance. Before finalising the annual budget, you should confirm:
- the criticality of each piece of equipment;
- breakdown data;
- work orders;
- bills of materials;
- MRO inventory.
At this point, you may be wondering how you can reduce maintenance costs. If you are calculating to buy inventory, that may be your first thought. But it’s not the only one. If you review your maintenance plan to eliminate duplicate and unnecessary tasks, you reduce labour hours and the amount of materials you need.
Best practices for making a maintenance budget
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Prepare a reserve fund for emergencies
You know how condos always have a common reserve fund, usually 10% of the annual budget? That’s exactly what you need. After budgeting, add a reserve fund (the percentage can vary depending on the condition of the facilities). Planning for a breakdown is not a defeat — it’s planning for the inevitable.
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Analyse previous years’ budgets
Asset history is an inexhaustible source of information. But the budget from previous years allows you to assess when, where, and why you spent more than planned. Was it on preventative or reactive maintenance? And is there anything different this year, such as condition monitoring technology or maintenance management software, that might influence the results?
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Take into account variations throughout the year
Often, Maintenance and facility management costs vary throughout the year. For example, a hotel can be expected to have more maintenance expenses during the peak season when it receives more guests. So, when preparing your annual budget, don’t forget to forecast for each season.
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Beware of the “hidden costs”
Don’t forget to include less obvious expenses, such as the training of new technicians, software licences (maintenance platforms or invoicing software, for example), liability insurance, parts and materials that your technicians buy from local shops because it is quicker or more convenient, among others.
Why should you prepare a maintenance budget?
“Because the company manager asked for it.” We’re sure this was the answer on the tip of your tongue. But if you are a maintenance manager, preparing a budget also has many advantages for you. Making a maintenance budget improves the stability, predictability, and consistency of your work. Here are three advantages of preparing a budget:
- Better cost control: most factories spend between 5 to 15% of their annual budget on maintenance. Preparing a detailed budget helps you identify waste, better manage material purchases, and even assess the efficiency of your internal processes. Over time, you’ll find more ways to cut costs.
- Assessing equipment reliability: when maintenance is planned according to a budget, variations become evident. By analysing where you’ve slipped on budget, you also assess asset performance. With this analysis, you can make better decisions, increase asset reliability, and prevent breakdowns.
- Establishing department credibility: If the maintenance department sticks to the planned budget, it shows that there is a justification for every cost. It thus gains credibility and demonstrates that maintenance is not “just expenses” after all. At the same time, it proves your experience and knowledge.
Preparing a maintenance or facility management budget is a task full of obstacles. You may lack information about the equipment’s history. And you cannot overlook any expense. But the rewards are worth it!
