A well-run homeowner’s association carefully prepares and monitors financial transactions. By neglecting to have an efficient system in place or not having a specialist cautiously monitoring the records, things can become quite complicated very rapidly.
Keep on reading to discover the five amazing tips on how to protect your association’s finances and boost overall HOA financial stability.
1. Improve HOA financial data
There are various accounting methods available for HOA. While Modified Accrual and Cash methods are appropriate to use for interim financial reporting, the most popular Accounting method is Accrual. Make sure to use this accounting method for correct and timely reporting. However, the accuracy of your financial data doesn’t solely depend on the method you’ve chosen. You also have to vigorously record all of your financial transactions without neglecting even one. It’s also essential to start preparing your financial records early.
2. Perform regular audits
Because HOA audit involves a sheer amount of work to do, many board members shudder at the thought of it. Nevertheless, audits are crucial to achieving HOA financial stability. There’s no need to perform an audit yourself. The more effective way is to have an outside specialist conducting the audit and providing you a big-picture look at your HOA’s financial health. The frequency of audits depends on your state laws and your organization’s governing documents. Make sure to check your CC&Rs to determine if there’s any information about audits. Often, the recommendation is to perform an audit annually to estimate your HOA’s financial stability.
3. Evaluate expenses
Nobody likes to pay huge fees, including homeowners. That’s why it’s best to avoid raising HOA dues as long as doesn’t decrease the community’s well-being. Reducing some expenses to save money is the perfect way to do this. Go over your HOA’s spending to determine if there’s anything you can cut back on. Check whether you can save money on property maintenance, vendor contracts, utilities, and legal costs. You can even try asking your vendors for a discount - it will all add up in the end.
4. Talk to your accountant
Running a financially stable homeowners association is almost impossible without having a reputable accounting specialist. An accountant is essential to make important financial decisions, evaluating reports, and ensuring your financial data is accurate. A specialist can also help you with planning your reserve funds and looking for areas where it’s possible to save up. To find an accounting specialist that can offer a different point of view, make sure to look for someone outside your HOA.
5. Stay transparent
Because homeowners hate feeling out of the loop with an association that just doesn’t seem to care, it’s vital to ensure that transparency is held at a high degree in your HOA. Make sure homeowners know what you’re spending their money at. By staying straightforward and transparent, you can easily build trust between the residents and the board of directors. In the end, if emergencies require special assessments, the community members will be more understanding.
The bottom line
Every homeowner’s association desires to become financially stable. Unfortunately, the road to financial stability can be quite hard, particularly if you have no idea of what you’re doing. Luckily, the aforementioned tips can help you adapt and make things easier. Make sure to keep track of your financial transactions to improve your financial reports. Don’t forget about performing regular audits to stay financially stable. Reduce HOA’s expenses to save money and always stay financially transparent for your community members. And last but not least, consult your accountant to ensure that your financial data is accurate and to find other areas where you can save up.