Article by:
Amelia Grant
The stability of a homeowners association's (HOA) finances depends on its financial management and reporting. Clients rely on the HOA to assist them in maintaining the association's financial stability. This covers all activities, from routine tasks like fee collection and bill payment on the HOA's behalf to yearly audits and budgetary meetings.
Every HOA is different, and as a result, may have particular administration and financial reporting demands. Before making any modifications to the association's best practices, as with anything involving the HOA's money, it is necessary to have board approval. To improve their financial reporting and management techniques, businesses might make use of some helpful advice. The HOA clients can ensure that they have improved reporting by putting these strategies into practice.
The following six suggestions may help improve your HOA's financial reporting.
1. Be aware of the accounting method
Understanding the many accounting techniques that are used to improve HOA's financial health is beneficial. An HOA should be aware of which is preferable for its financial reporting responsibilities, cash or accrual. They track money as it is received and expenditures as they are incurred using the cash accounting system. With the accrual method, costs are recorded as they are incurred, even if payments haven't been made, and income is recorded as it is produced, even if funds haven't been received.
2. Explore state laws
The customer of an HOA must next be familiar with state law. Since HOA financial restrictions might differ greatly between different states, they should research the laws that apply in their state. While some states only demand the barest minimums, others place tight limitations. Limitations on HOA fees, auditing procedures, or other aspects of financial management may be among these limits.
3. Use old records and reports
When conducting research, using older documents and reports can be beneficial. It is preferable if reports are constant in order to maintain the same degree of success and HOA financial health if the HOA is in an excellent financial position. However, it can be wiser to transition to a different reporting model if the HOA is having financial issues. They can assist in figuring out the reasons the HOA's finances are having problems by using previous reports or other pertinent financial records.
4. Monitor financial transactions
Real-time financial transaction monitoring aids HOA in preventing fraud and financial abuse among its board members. Separate bank accounts can be synced to a financial management dashboard using automatic bank reconciliation in HOA accounting software. The HOA clients can then view transactions in real time from that point. Something suspicious can be noted and investigated.
5. Keep financial information in the cloud
By storing financial data in the cloud, the HOA can more readily find its info. This enables the HOA members to view data and administer the HOA's accounts from any computer or Internet-connected device, while still keeping data secure and available to the appropriate parties.
6. Make monthly reports
HOAs should maintain a 12-month spreadsheet that compares monthly income and expenditures to those from the prior month and the prior year. This alerts the HOA to any unusual or perhaps criminal activity. If an expense is seasonal or if certain invoices haven't been paid yet, the amounts may be incorrect. Every month when an association reviews its budget, some disparities may become apparent, allowing for the proactive limitation of further problems.