Balancing your checkbook is very different than managing a Homeowners Associations (HOA) financial records. If you are responsible for the bookkeeping, you should probably hire an accountant if you don’t have the knowledge or experience needed to maintain the books according to the current laws.
According to the Community Associations Institute trade organization, HOAs govern over 24 million American homes and 62 million people in the United States. Approximately 14 million are California residents residing in a Homeowners Association (HOA) neighborhood, making it the largest in the country.
Other homeowners elect the board of directors for each HOA community. Their responsibility is to maintain the community and keep it running smoothly and effectively. Furthermore, HOA accounting is a whole different ballgame than keeping track of your own personal finances.
This article will provide the insights needed to make the correct decision on why hiring an accountant is best for you and your community.
Homeowners Association Accounting: What You Should Expect
The Homeowners association accounting can be very complicated. Usually, the association often has to deal with multiple bank accounts, memberships, and taxes due at the end of every year.
This is why it’s vital to hire capable hands with the sole responsibility of managing the homeowners association. Although not all accountants will do the same things as most associations require customized services.
Nevertheless, if you are looking to hire an accountant, you should expect some essential services. These include:
- Bookkeeping, tax preparation, and planning
- Financial statement creation for both internal purposes and auditing if necessary (although a management company usually handles this)
- Budgeting assistance
- Cash flow forecasting help
- Vendor payment processing using either checks or electronic transfers depending on the preference of client/board members
- Payroll processing such as filing employee withholding forms like W-11s & W-KCs with proper state & federal agencies
- Tracking receivables and payables
- Inventory systems for larger communities or vacation homeowners associations (HOAs)
- Setting up accounts payable/receivable via electronic credit cards or ACH transfers through your bank’s online bill payment system
Homeowners Associations that are looking to hire an accountant should consider the following:
How to Find the Right Candidate
Not all accountants know how to handle the financial records for HOAs. Just like any other job, they may not have the knowledge needed in this area of expertise.
Before hiring one, make sure they understand how HOA dues work and what is involved with everyday expenses such as insurance or maintenance fees. Ask them if they have worked with other HOA’s financial records and if they have some references.
You do not want your monthly homeowner’s fee to be wasted on an unnecessary expense because your accountant did not fully understand what you were trying to accomplish!
Make sure that you find out if their services include phone consultations for clarification purposes when needed. Having experience handling these types of financial accounts will help speed up the process to get done more quickly.
Plus, you can rest easy knowing that everything is completed correctly, and no unnecessary fees will be added to your monthly contract for the HOA accounting services.
Check for Credibility
Homeowners associations with multiple board members will often need an accountant who has experience working with an HOA board of directors. Make sure they have credible references from other homeowners associations that match your needs.
It is recommended that the accountant firm you hire has plenty of experience with HOAs and the issues that frequently occur.
The Benefits of Hiring an Experienced HOA Management or Accounting Team
Hiring an experienced HOA management or accounting team comes with huge benefits. Here are some of the top reasons you should consider hiring a professional:
Impeccable Financial Statements
HOA associations are required by law to maintain reliable, comprehensive, and compliant financial statements at all times. Knowing that experienced professionals have got things covered is crucial for growth in the association.
To preserve your community’s property values and membership satisfaction, an HOA must constantly supply and use funds for the community. The management company should also ensure that all necessary paperwork is completed accordingly.
As a result, these assets and costs must be expertly tracked and controlled daily to provide the board with a complete picture of the association’s financial situation at any time.
Dependable Support for Financial Matters
The best HOA managers keep records of all activities performed at the community for tax purposes and provide a report at annual meetings so that members can see how funds were spent during the past year.
The budget plan will remain balanced while expenses stay under control when there is proper oversight from professional HOA managers following industry-standard accounting procedures.
Members rely on this information to make crucial decisions concerning future planning for the neighborhood’s finances, amenities, upkeep schedule, etc., which means it needs to be accurate and reliable.
Homeowners association management companies are equipped with the education, experience, tools, financial resources, and technology to handle all aspects of property management so that homeowners can avoid unnecessary stress in their lives related to HOA matters.
An HOA manager will also help market your neighborhood by providing events for members who keep them connected throughout the year instead of just at annual meetings or elections.
Save Time and Money
When you have professionals who understand HOA accounting and know how to maximize your budgeting, you can use the residual funds for things that matter. These may include maintaining property values in your community or updating aging buildings within an HOA setting.
Additionally, avoid potentially devastating consequences when trying to manage Homeowner Association finances yourself. You may find it challenging to pay Homeowner Association bills on time, be fined for not filing tax returns, or keep proper books and records, resulting in property loss.
Every HOA has unique features and demands that are slightly different from others. An efficient management company understands this and hammers out strategies that meet the association’s needs.
HOA accounting is a specialized field, and those who work in it must be completely up to date with the standards unique to financial management for homeowners associations.
Accounts for HOAs are distinct from those of for-profit firms. Because HOAs are non-profit institutions, any money received must be paid out to vendors, set aside in reserves, or used to finance the following year’s expenditures.
As a result, hiring an accounting firm that understands the rules for homeowners associations becomes crucial.
Fostering Healthier Relationships in the Community
An HOA management company’s responsibilities go far beyond property management and enforcing rules. They also work to build better communication and healthier relationships within the association and community at large.
They achieve this by creating an environment where people feel like they are part of something bigger, not just a number in some financial report.
Regardless of your financial situation or Homeowners Association size, hiring an accountant can help lead to a much more productive experience for everyone involved.
It’s essential to hire someone who knows how to properly handle HOA Management Accounting before all of these issues occur, and you find yourself mishandling money down the road.
If you’re not sure where to start with finding a good Homeowner Association manager – contact us today for all the details needed to get you the help you need!