There are many HOAs located all over the United States. Regardless of their size or location, they all require strong financial management. External management services benefit communities large and small. They enable the HOA to focus on more community-based activities. HOA Bookkeeping is an essential aspect of association management. HOAs that have efficient bookkeeping practices are far better off in the long-term than those that do not. That said, many communities struggle to keep up with bookkeeping. They often end up spending more than they should as a result.
What Is HOA Bookkeeping?
HOA bookkeeping includes the various accounting records of an HOA that are required to ensure the HOA is meeting its expenses. HOA bookkeeping can be completed on an accrual basis, cash basis or modified accrual basis. Each method has its own benefits and drawbacks depending on the location and size of the HOA. Each of these accounting methods are used to prepare two important documents for the HOA: the Balance Sheet and the Statement of Income. The Balance Sheet shows the association’s financial status as assets minus liabilities to calculate a total value. The Statement of Income and Expense divides transactions into different time periods. This shows how much the HOA spent compared to the projected budget for a one month, quarterly or annual period.
What Is the Difference Between Accrual, Cash, and Modified Accrual Methods?
Accrual accounting records all HOA financial activities on the financial statements regardless of when the payments are made. The cash method only records expenses and income when the money changes hands. The modified accrual method is essentially a combination of the cash and accrual basis accounting methods. Revenues are reported when they are earned rather than when they are received, and expenses are reported when they are paid instead of when they are incurred.
Understand the State Law Where Your Community Is Located
It is important to bear in mind the location of your community. Be aware of any potential state or local laws that may affect your HOAs accounting requirements. By having a basic knowledge of what is required, it will be possible for you to avoid many common pitfalls that HOAs fall into that have substantial financial consequences.
The Ideal Model for Your Community
Regardless of the size of your community, it is important to have accurate and efficient HOA Bookkeeping in place. This is precisely why it can be beneficial to outsource this service to a company that is experienced and can handle your community’s financials with ease. Clark Simson Miller has a great deal of expertise in handling the bookkeeping of HOAs all over the United States through our Remote Management Services. If your community is interested about how our Remote Management Services could manage your community’s HOA bookkeeping and make a positive impact, it is wise to request a proposal from Clark Simson Miller or to contact us via phone by calling (865) 315-7505.