HOA financial management, and effective financial management in general, is a crucial part of running an HOA. That’s why an HOA financial manager is such an asset to the HOA board. Expertise in HOA finance and HOA accounting is a must. Let’s look at the top benefits of hiring an HOA financial management company in your community.
Benefits of HOA Financial Management: Why You Need It
Let’s face it: the financial aspects of running a homeowners association can be tough to handle. This is especially true if your association is smaller or you have board members who are already overworked. You may not realize that your HOA is overpaying for services, setting itself up for more financial difficulties down the road. Maybe you aren’t sure how to plan for your reserve fund or how much to add to it.
HOA board members, especially in newer managed communities, can try to do it themselves. Some succeed, to varying extents. After all, HOAs are different, and so are their HOA financial management needs. What is the same for every HOA, however, is the element of financial risk. Self-managing your HOA finances is fine, but keep in mind that there are risks to doing everything on your own.
All of these problems can be solved when working with a quality HOA financial management company. There are several ways property managers can help with HOA finances and managing costs in your HOA so you can focus on other parts of your board member duties.
1. Reliable HOA Financial Expertise
HOA board members vary a lot from one community to another. So is the background of the members that make up the HOA management team.
Thus, some HOAs may be fortunate enough to have CPAs or attorneys as part of the board. For these teams, at least one of its members will have the right background to run your HOA finances effectively.
It’s safe to say that not every community will have the luxury of having an accountant on board. Much less one with actual HOA financial experience. Plus, HOA board members change over time. So if you have the right people now, it’s still no guarantee that you can still benefit from their HOA financial management expertise next year.
Your HOA needs the right financial expertise. It also needs to be able to retain that expertise throughout the years, as well. That’s why it just makes sense to hire the right HOA financial management company.
This way, you have an institutional arrangement that you can rely on, even for the next five or ten years. By that time, many of your current HOA board members may have moved on. Even if they do so, you still have the HOA financial expertise you need.
2. Establish Checks and Balances
When it comes to money, HOA financials can get into large sums, indeed. That’s why conflict of interest is a common problem when it involves the HOA board. Board members may have relationships or ties to service providers, and this can factor in the spending decisions that the board makes.
Having a third-party HOA financial management service can help your HOA set up the right checks and balances. So with another person overseeing your HOA finances, it’s simpler to establish measures such as:
- Having one person approve invoices and having a different one write checks
- Having a person record the receipts, then have a different, unrelated person make the deposits
- Requiring at least two signatures on all important transactions and checks, or those involving sums over a certain amount
- Minimizing the cash transactions that your HOA undertakes, which means paying vendors and employees with checks or bank transfers
- Avoiding cashing checks to pay salaries or service providers
- Deposit checks every day, with the sum going directly to the HOA’s account (or store them securely if beyond banking hours)
- Having all payments to the HOA as an entity, instead of having them go through a board member or manager
3. Provide Vendor Oversight
A lot of associations will attempt to do vendor oversight on their own.
But they also don’t realize what all needs to go into examining vendors, such as negotiating vendor contracts, managing the bidding process, and making sure vendors continue to follow the terms of their contract with you.
When you outsource these duties to an HOA management company, you can rest assured that someone is taking care of it.
4. Manage Expense Accounts
If your community is well-established, you likely have many expense accounts to manage. The problem with having board members handle these accounts is that many will not have the proper training—or time—to give them the right amount of attention.
Ideally, you also want to outsource these tasks to an HOA manager who is specially trained in handling expense accounts and keeping them in good standing. Again, this gives you more time to focus on other duties and in interacting with your residents.
5. Assist in Reserve Fund Studies
Reserve fund studies should ideally be performed every year. You want to have a good reserve fund to cover any expenses that pop up, such as HVAC repair, new roofing, or other planned expenses that come with building management. If your board is not experienced in this area, it can quickly become confusing and overwhelming. Hire an HOA management company to handle it for you and take away the headache.
HOA Financial Management: Building a Financially Stable Homeowners Association
HOA financial management is not easy. It’s also an important foundation for the security and stability of your association. So it’s always a good idea to get expert help when you need it. Is your HOA still self-managing its finances? Then it’s perhaps time to look into a stable, reliable solution. It’s never too late to start today!
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