Homeowners associations face several challenges when it comes to managing your finances. You have to stay on top of all funds coming in and going out, keep an eye out for fraud or embezzlement, and confirm you have a solid long-term financial strategy for the community. HOA board members don't always have a strong understanding of accounting for this type of organization, which can lead to mismanaged funds and other problems. Use these five tactics to avoid accounting problems with your HOA.
Base Your HOA Fees Around Your Budget
Many organizations start with the fee they charge homeowners. They want to keep everyone happy and bring in more community members so they price this payment low. When it comes time to put together the budget, you face major problems covering your expenses because the fees don't support the community's outlay. Start with your projected budget first. If you have expense records from the past, reference those for budget creation.
Audit Your Records
Everyone makes mistakes, but financial errors can create a domino effect on your accounting. Schedule regular audits to check for any inconsistencies in your accounting. When you catch problems early, you can stop them from having a major impact down the road.
Use Software to Track Everything
Paper records are inefficient, easy to lose, and make bookkeeping harder than it needs to be. Allocate some room in your HOA budget for an accounting system capable of meeting your needs. You have a single unified system for entering your financial records, as well as useful automation that reduces the time you spend working on the books.
Don't Skip Reports
Monthly, quarterly and yearly reports are an excellent way of looking at your progress and getting a big picture view of your HOA's financial health. Don't skip out on these reports, because they're essential to avoiding accounting problems. When you're familiar with your typical accounting situation, any out of character problems will stick out so you address them sooner rather than later.
HOA fraud occurs with many methods, but a common tactic is setting up vendor invoices for companies that don't actually exist, or partnering with a vendor to get kick backs. Look into all the vendors showing up in your accounting to confirm that they're legitimate. You can also take this time to shop around for new vendors or negotiate better contracts.