Learn Why HOA Accounting Matters and What It Entails

Also known as the basis of accounting, the accounting methods dictate the timing at which you record your association’s financial transactions. There are three accounting methods to choose from — Cash Accounting, Accrual Accounting, and Modified Accrual Accounting. Every day, association funds should be directly deposited into the homeowners association’s bank account and the receivable department should record the deposits. The community manager should go over invoices to make sure they’re accurate and they should approve invoiced work before payment.

Review

Keeping track of all the expenses is hard work, and knowing what they are is often half the battle. The finance department will then get the bank statements and go over the deposits and checks. The finance department’s main goal is to maintain an accurate, consistent record of the association’s financial transactions.

The Benefits of Outsourcing HOA Accounting

Even a modest cushion can help prevent future overspending, debt, or special assessments. Fidelity bonds are insurance policies put into place to provide the HOA with protection from fraud and theft by the people handling the association’s money, including board members and HOA employees. Software that enables a direct link between banks and HOA boards is an important trait to look for, because of the amount of manual work it saves. When HOA board members need to process payments by hand, the actions can be time-consuming, month after month. Choosing which technology platform the organization will use is part of this upgrade process.

• Payments made online and mailed checks sent to a lockbox go directly into the community’s bank account, avoiding hold-ups and misplaced checks.
• Break down your expense accounts into more specific accounts such as “Legal Fees” and “Maintenance Supplies.” In doing so, you can more accurately track where your HOA’s money is going.
• Therefore, you may not be able to push through with any pending legal cases with the homeowner or collect past due balances.
• The following four condo / HOA financial reports are vital tools for protection of association assets, control and planning.
• Managing the association’s finances is one of your most important responsibilities as an HOA board member.

Time and Resource Savings

If you’ve ever been responsible for planning a big party or event, overseeing a home renovation, or even budgeting for a trip, you know how easy it is to overspend. The same applies to managing an HOA budget, but on a much larger scale. While it isn’t always possible, associations should try to leave room for unplanned expenses in their budget.

If it is mid-term, you’ll want to look at the termination paragraph of the contract. One powerful way to reduce delinquencies is to impact one’s credit score. Click here to find out how reporting delinquent HOA and Condo owners to a credit agency works. You may be skeptical of working with a company not located in your area. However, you already receive a lot of remote services from credit card companies, utility companies and banks.

• As you learn the role, however, you may find that not all accounting is created equal.
• Our state of the art online systems provide transparency, increased control and enhance owner trust.
• The board will also have an opportunity to look for a new service provider if they know in advance that a current partner is increasing their prices.
• “Budgeted versus actual” or “standard versus actual” costs compare budgeted costs and the amount of recorded costs.
• You don’t need to have an awkward in-person conversation about an unpaid fee or dues–you can send a digital reminder.

Stressed out managing your HOA?

This type of report is all-inclusive and HOA Accounting includes both verification and substantiation services. The CPA will verify the debtors and creditors on amounts owed and they will also inspect the homeowners association’s inventories. The CPA will also inspect the homeowners association’s contract for mistakes.

Aged Delinquency Report

While modified accrual accounting does give you a clearer view of your revenues, it does not do the same for your expenses. HOA accrual accounting is simply superior because it helps you financially plan and budget for the future as well as allows you to make informed decisions. A modified method is deemed appropriate for preparing interim financial reports for the HOA as you wait to make all payments for expenses that the HOA has incurred.