HOA managers are professional individuals who run a community’s day-to-day activities on behalf of the board members. Depending on the agreement, they collect HOA dues, maintain common areas, and enforce the rules and regulations of the community.
Like any other business, they depend on members to provide the services. This makes proper handling and managing of finances one of the ultimate goals of all HOA managers and board members alike.
However, this isn’t as easy as it sounds. Homeowners Association management comes with several challenges, including some homeowners refusing to pay dues and non-abider of set rules and regulations.
HOA budgets have not been spared, with the lingering pandemic effects on economies. Managers and board members need to restrategize to reduce expenditure while maintaining quality service delivery.
Below are some effective methods HOA managers can use to improve their finances and cut operational costs. Let’s start with financial management.
Adopting An Effective Accounting Method
HOAs can choose from three accounting methods: cash accounting, accrual accounting, or hybrid accounting (modified accrual).
This is the simplest form of accounting and the most preferred by small businesses and individuals. You just need to record the revenue from goods and services as they are paid and expenses made.
In simple terms, you keep records as money changes hands.
With this method, you record revenues and expenses as they occur. You keep records whenever a transaction takes place (income and expenditure).
This is the combination of both cash and accrual accounting. With this, you record revenue as it happens and expenditures when they occur.
Is the method you are using now effective? You can consider another to ensure accurate recordings of revenues and expenditure. It would help if you always had an eye on your financial statements before it’s too late.
Frequent reviews allow for better responses and strategies to maintain good financial health.
Be Attentive with Recordings
It is possible to record revenue under expenditure and vice versa. It is also possible to input wrong figures, for example, omitting a zero from an amount. These mistakes can cause you great harm, and not rectifying them means your financial statements would be full of flaws.
It would be best if you were on the lookout for such errors at all times.
Budgeted Funds Must Be Used For Exact Purposes
Most HOA managers make a common mistake in using funds meant for a specific purpose. For example, using monies allocated for maintenance to pay a different expense can create unnecessary delays, leading to additional costs.
If it becomes inevitable, replace the used funds as soon as possible. HOAs must record all maintenance work accurately to avoid any issues later on.
Set Aside Funds for All Mandatory Expenditures
As an HOA manager, you know your core duties and what the community expects from you. You also know how much dues you can have. With this date, plan all your expenses according to the revenue you receive.
Set aside funds for expenditures like routine maintenance works, repairs, and replacements.
Four Ways To Cut Down Operational Costs
#1 Check Your Insurance Policy
Insurance policies consume a substantial part of any HOA budget. Home insurance is vital and something you cannot do away with as it gives you coverage if something happens. Nonetheless, you can still do something about the money involved.
A periodic review of the home insurance policies can give you insights to reduce your premium without affecting the coverage. Insurance does increase and decrease over time, take advantage to reduce your premium when possible.
That aside, you can check and compare prices from other companies that offer the same coverage at lower premiums, which allows you to use that as a renegotiation tool when it’s time to renew your current policies.
Outsource Some Tasks
As HOA board members, you will need the services of others to achieve set goals and targets. You need people to handle administrative duties, maintenance work, financial management, etc.
You’ll need to decide whether to hire full-time workers or outsource some tasks to a virtual company/assistant. Permanent workers are costly to maintain compared to outsourcing jobs.
So, as you seek to save money, the best decision is to outsource the back-office duties. Instead of bringing in full-timers, you can hire professionals when a service is needed, saving money and delivering efficiency.
Check the Utility Tariffs
Utility tariffs are another area to look at when finding ways to reduce an HOA budget. If you constantly receive high electricity and water bills, you need to check what’s wrong. Analyze the statements from individual homes as compared to that of common areas.
If the bills from the common areas are very high, then it’s time to make some changes and adopt energy-efficient measures. Save the association some money by replacing all CFL bulbs with LED lightings.
The lights in common areas should go off when no one uses the space. For the water bills, hire a plumber to check for leaks. HOA management can also adopt smart irrigation systems to reduce the amount of water used for such purposes.
You can educate community members on efficient ways to use water and electricity to cut costs.
Renegotiate with Vendors
Another way to save money is to review HOA contracts with service providers and renegotiate them. Find out if it’s possible to reduce their charges while maintaining the same services. Or if there are cheaper but standard options.
While renegotiating, you can get quotes from other vendors or contractors and compare prices. All you need is quality service, so why not go for it if there are cheaper options?
As HOA board members or managers, your top priority should be providing quality service to community members. You should meet their expectations and standards by putting the dues collected into good use.
Be innovative with your approach, and never sacrifice the quality of service!