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Understanding KPIs in a Strata Context

Key Performance Indicators (KPIs) are widely used in the business world to monitor profitability, efficiency, and growth. Think metrics like return on equity, net profit margins, or revenue growth. But when it comes to strata companies, many of those traditional KPIs don’t really apply. After all, strata entities aren’t operating to generate a profit—they’re there to maintain common property, fund long-term capital works, and keep things ticking over in line with regulatory and legislative requirements.

But that doesn’t mean KPIs have no place in strata.  In fact, a tailored set of simple, meaningful indicators can offer valuable insight into the financial health and performance of a building—particularly for larger complexes. This article explores some of the most practical KPIs we’ve seen strata managers and councils benefit from, and how a dashboard-style approach could help track them.

 

Suggested KPIs for the Admin Fund

1. Cash as a Percentage of Budgeted Expenses

   • A basic but helpful measure of financial buffer. Compare end-of-year admin fund cash to next year’s expected admin expenditure. A healthy range is usually 20–30%. Too little cash might delay early-year invoices like insurance. Too much may mean owners have paid more than needed.

2. Net Assets to Budgeted Expenditure

   • A cross-check of whether your balance sheet can support your expected outgoings. Similar to the previous suggestion, but includes liabilities for a more complete picture.

3. Arrears as a Percentage of Annual Levies

   • Because most levies are raised quarterly in advance, arrears at year-end generally mean funds that should have been received at least three months ago. Comparing arrears to total levies gives an objective measure of the scale and whether action is warranted.

4. Expenditure to Budget (Overall)

   • WA legislation limits how far over budget you can go without formal approval. Tracking actual admin fund spending against budget throughout the year is a key compliance and performance measure.

5. Expenditure to Budget (By Category)

   • Breaking down budget-to-actual comparisons into broad headings like maintenance, insurance, and admin expenses helps highlight where overspending or savings are occurring.

6. Levy Stability Year on Year

   • While businesses chase revenue growth, a strata company ideally sees consistent levies over time. Comparing the current year’s admin fund levies to previous years can help identify good planning—or unexpected shocks.

 

Suggested KPIs for the Reserve Fund (Sinking Fund)

1. Expenditure Against the 10-Year Plan

   • Compare actual spending on capital items to what was forecast in the plan. This gives insight into how well the plan is being followed.

2. Reserve Fund Cash vs Forecast

   • Check the reserve fund balance against where the plan suggests it should be by this point in time. Deviations may require review.

3. Reserve Fund as a % of Insured Replacement Value

   • For buildings without a 10-year plan, a simplified proxy is to track reserve fund cash (or net assets) against the building’s insured value, perhaps using a target ratio agreed with council.

4. Age of the 10-Year Maintenance Plan

   • If it’s over five years old, it may be outdated. Regulations vary by state, but monitoring how current the plan is offers a simple compliance and planning checkpoint.

5. Completion of Scheduled Works

   • A simple tally of how many planned projects were completed compared to what was forecast. Helpful in identifying delivery bottlenecks or deferred maintenance.

 

The Dashboard Concept: Visualising Strata Health

For larger buildings, or simply those wanting a better overview, a dashboard can be a great way to present this information. Think of colour-coded indicators (green, amber, red) or dial-style displays that instantly show whether each KPI is within tolerance.

For example:

• Admin Fund Cash Ratio: 19% – Amber

• Arrears to Annual Levies: 5% – Green

 

This kind of visual tool can be incredibly helpful not just for managers, but for owners and council members too. It brings clarity to conversations and supports proactive decision-making.

 

Quick Takes:

• KPIs are just as useful in strata when adapted to reflect financial health rather than profit.

• Useful admin fund KPIs include cash ratio, arrears levels, and expenditure tracking.

• Reserve fund KPIs should monitor alignment with long-term maintenance plans.

• A dashboard is a great visual way to bring these metrics together.

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If you'd like to explore setting a strata KPI framework for your clients, feel free to reach out to our admin team. 

 

Links:

- The Strata's Financial Layouts Are Just Fine

- Optimising Your Strata Chart of Accounts

 

The above content is of a general nature and should not be relied upon as professional advice. Ascend encourages readers to seek advice from suitably qualified professionals in relation to their specific circumstances and not to rely solely on the information provided above. Please contact our office for more information.

 

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