The most widely used set of accounting principles is known as the Generally Accepted Accounting Principles (GAAP). Lastly, the cash disbursements ledger lists down all of the checks your association has written and issued for the period specified. Otherwise known as a check register, this report consists of information such as the check’s recipient, the check date, and a description of the expense. It should also outline the check numbers, chart of accounts numbers, and any related invoice numbers.

Professional Financial Management for Homeowner Association (HOA) & Condo Accounting & Remote Services

• Good record-keeping is a universal value for organizations to adopt, and in this way, an HOA management company is no different from any other type of business.
• This will not just enable them to take their accounting method and financial practices to a new level, it will ensure they can go longer without performing another upgrade.
• It also gives community members peace of mind when there is accurate and efficient management of finances.
• This includes identifying expenses like maintenance, repairs, and administrative costs, as well as determining revenue sources such as homeowner dues and other fees.
• As the HOA manager, you’re in a position to help the association create and maintain a strong foundation for lasting financial health.

After all, your board has a duty to protect your HOA finances and assets. You should also make sure that checks made out to your HOA go directly into the proper bank account. It’s also a good idea to assign someone, usually the HOA manager, hoa accounting to review all invoices, deposits, and bank statements. Accounting is arguably one of the most challenging aspects of managing an HOA community. Yet, HOA accounting remains an integral part of your job as an HOA board member.

HOA Budgets Serve a Purpose

If the number of delinquencies in your association accounts for more than 5 percent of yearly dues, then you should include a line item in your budget for bad debt. This way, you can offset some of the delinquencies and avoid ending up with a budget deficit. When planning your budget, it’s always a good idea to look at every line item from past data. Compare the actual expenses the association incurred in the last 3 to 5 years. This way, you can get a rough grasp of what your upcoming year will have in store in terms of costs.

What Basis of Accounting Should You Use?

In the case of negative equity, the board may need to consider increasing owner assessments or readjusting the HOA budget to avoid depleting its reserves. If your records are inaccurate or disorganized, you could accidentally overspend or make unwise financial decisions. Your reserve funds could also be insufficient when you need them most, causing you to ask for extra payments from your community members. Strong vendor relationships are essential for your association management company and the HOAs you serve. A lot of logistics and planning go into keeping the communities secure, safe, and clean.

Which HOA Violations Should an Association Management Company Enforce?

• As an HOA Board Member, you must have a basic understanding of your association’s accounting and finances, but in-depth accountancy can be complex and overwhelming.
• It’s important to check your governing documents first before you plan HOA budgets.
• It also supports community health by allowing all community residents and stakeholders to be a part of the team.
• Demand fees typically include unpaid fines for HOA violations, delinquent association dues, late payments, collection costs, interest, ownership transfer fees, and buyer move-in fees.
• Generally, there are five financial statements HOAs should prepare — Balance Sheet, Income Statement, General Ledger, Cash Disbursements Ledger, and Accounts Payable Report.
• If you treat the process as a marathon rather than a sprint, you will have a budget to keep you on track during the year.

When an elected community member self prepares financial statements, make sure that there is a backup of all financial records. Smaller, self-managed associations may have an elected treasurer, financial officer, or president that is responsible for compiling financial documents. In such cases, it is a good idea to use a professional accountant to ensure that HOA accounting statements are prepared correctly before releasing https://www.bookstime.com/ them to board and community members. Remember, just because someone was elected treasurer, does not necessarily mean they have accounting experience. Large homeowner’s associations have more complex budgets and will usually have a management company, such as CSM, that handles all financial data. HOA accounting is probably one of the most complex, and most important, responsibilities of the association board.

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