A well-run homeowner's association’s financial transactions should be meticulously prepared and monitored. Things can quickly become problematic if you don't have an effective system in place or if you don't have an expert carefully maintaining the records.
Continue reading to learn five fantastic ideas for safeguarding your HOA's funds and improving overall financial stability.
1. Improve HOA financial data
HOA accounting can be done in a variety of ways. While the Modified Accrual and Cash methods are suitable for interim financial reporting, Accrual is the most widely used accounting method. Use this accounting procedure to ensure accurate and timely reporting. The accuracy of your financial data, on the other hand, is not solely dependent on the method you use. You must also meticulously track all of your financial transactions, not missing a single one. It's also critical to start keeping track of your finances as soon as possible.
2. Perform regular audits
Many board members tremble at the prospect of conducting a HOA audit because it entails so much work. Nonetheless, audits are essential for ensuring financial stability in a homeowners' association. There's no need to conduct your own audit. An outside specialist doing the audit and presenting you with a large-picture look at your HOA's financial health is a more effective technique. The frequency of audits is determined by state regulations and the governing papers of your organization. Check your CC&R to see whether any information concerning audits is contained there. Performing an annual audit to assess your HOA's financial stability is frequently recommended.
3. Evaluate expenses
Not a single person, especially homeowners, enjoys paying excessive fees. Hence, as long as the community's well-being isn't jeopardized, it's advisable to avoid hiking HOA dues. Cutting back on some spending to save money is a great place to start. Examine your HOA's expenditures to see if there are any areas where you may save money. Determine whether you can save expenditures in areas like property maintenance, vendor contracts, utilities, and legal fees. You can even negotiate for a discount from your vendors; it will all add up in the end.
4. Talk to your accountant
It's extremely hard to run a financially sound homeowners association without the help of a professional accountant. Making crucial financial decisions, assessing reports, and making sure your financial data is correct all require the services of an accountant. An expert can also assist you in arranging your reserve funds and identifying places where you may save money. Make sure to explore outside your HOA for an accounting consultant who might provide an alternative perspective.
5. Stay transparent
Because homeowners, despite feeling left in the dark by an association that doesn't seem to care, it's critical that your HOA maintains a high level of transparency. Make sure the homeowners are aware of where their money is going. You may quickly develop trust between residents and the board of directors by remaining plain and open. In the end, if exceptional evaluations are required due to an emergency, the community will be more understanding.
The bottom line
Every homeowner's association seeks to accomplish financial stability. However, doing so is difficult, especially if you have no clue what you're in for. Fortunately, the above tips can assist you in adjusting and making things simpler. To strengthen your financial reporting, keep track of your financial transactions. To keep financially stable, don't forget to conduct frequent audits. Decrease your HOA's expenses to save money and ensure that your community's finances are always clear. Last but not least, talk to your accountant about double-checking your financial data and identifying other places where you can save money.
