10 Financial Tips for Your Community Association
Having the finances well-organized in your Community Association is essential to maintain a great reputation amongst current and future residents. Many HOAs are not responsible with their finances, which causes them to not operate at their maximum potential. To learn more about how to properly manage your Community Association, consider these ten tips:
Make sure to set realistic expectations about your working capital needs. It is usually wise to keep at least half a month’s expenditures in the working capital’s fund. This way, you will not run into cash flow issues later on.
Create Your “Deferred Maintenance” Fund
Community Associations need to prepare for maintenance expenses. It is wise to assemble a “deferred maintenance” fund to collect from residents for larger painting expenses or maintenance needs over time. This way, residents will not be bombarded with expenses and you can accrue cash towards the larger maintenance expenses to be ready for them and not run out of capital.
Budgeting responsibly is essential. You need to consider what the daily financial needs of your community are and then add in some funds for unexpected emergencies. If you can budget in this way, you will have less financial issues when unexpected expenses do occur.
Write an Investment Policy
If you are going to assemble an investment plan, it is essential to write down your plan and have a clear-cut strategy. If you can do this, it will attract more investors and will subject you to less legal liability in the long-term.
Collect Your Dues
Collecting your management dues is vital to keep your cash flow positive. At times, it can be challenging to collect dues from all of your residents. Make sure to have clear cut policies posted to your residents that have a protocol for collecting payments and be sure to keep these policies consistent. By doing so, you will be able to collect important cash to get more payments.
Manage Your Accounting Efficiently
You need to prepare regular accounting reports. You need to assemble the current period’s expenditures, a detailed account of actual versus budgeted income and the overall expenditures for that particular period, a full accounting of receivables that are over 30 days overdue, and a finished balance sheet. By having this information prepared, it will be a great help to your business because you will be able to make informed budgeting decisions.
Examine Your Insurance Carefully
Insurance for Community Associations is an area where many Community Associations overspend considerably. Be sure that you calculate carefully what your insurance costs are to be sure that you are not overpaying. It is quite common for Community Associations to be paying a great deal of capital and then realize that they are not covered enough in a certain area when an emergency occurs. It is usually best to have a lawyer examine your insurance policy to be sure you are covered when you need to be at an affordable price.
Stay Connected to the Community Associations Institute
The Community Associations Institute is a valuable partnership for Community Associations to learn about new industry trends and to also grow their network. Be sure to establish a relationship with this organization and fully use its tools to benefit how you approach running your Community Association.
Speak with Your Auditor
Having a consistent relationship with your auditor is a wise decision. If you can regularly inform them about your financial progress, you will find that you will have fewer violations that will creep up on you in the long term.
How Clark Simson Miller Can Help With Your Financial Management
Be sure to carefully consider how your Community Association is managing its finances. If you do not manage your finances effectively, you will find that you will run into major issues in the future. Clark Simson Miller can serve as a source of assistance to your Community Association and how it manages its finances. To learn more about how Clark Simson Miller can help, contact us online or give us a call at (865) 315-7505.