Basic HOA Accounting: A Guide For HOA Board Members CSM

The HOA accounting best practices you follow can have an impact far beyond just sticking to a budget. In fact, in a recent survey detailing the challenges that community managers are facing in 2024, respondents said that rising maintenance costs were a major pain point. hoa bookkeeping Without proper accounting measures, those costs could send even the most well-meaning associations into the red. By outsourcing your bookkeeping to professionals with expertise in HOA accounting, you can rest assured that your books will be accurate. And, although HOA board members can have the skills to handle your HOA finances, trusting an affordable expert can ease the burden on a volunteer, freeing them up to handle other day-to-day tasks of HOA management.

Tax Preperation

The Accounts Receivable is a statement that lists all the money owed to the association. Additionally, there is plenty of available software that can assist self-managed communities. Some offer full-service HOA management features, while others focus on specific modules.

• There’s no one-size-fits-all solution for HOA bookkeeping as a service.
• Our online bill approval system requires two Board members (with their unique login) to review all invoices and approve them prior to payment.
• PayHOA’s team will even train new board members for your HOA, making the process seamless and simple for your volunteers.
• Click here to find out how reporting delinquent HOA and Condo owners to a credit agency works.
• This type of report is all-inclusive and includes both verification and substantiation services.
• Next up we’ll mail out a letter to all your vendors to change their billing address so invoices come to us.
• That means you only report transactions when you pay for them or receive payment for them.

Homeowners Association Annual Audit

Newer HOAs or ones with more basic budgets can prepare one every month without much issue. The balance sheet is a snapshot of the HOA’s financial health at a specific point in time. It provides a comprehensive view of the association’s assets, liabilities, and equity. Remember, a balance sheet must always stay balanced with total assets equating to total liabilities plus equity. The balance sheet includes insurance because it’s usually paid for in advance bookkeeping and payroll services and then capitalized on the report.

Bank Reconciliations

You’ll also see expenses such as utility bills, vendor payments, and maintenance costs. You can also use this financial document to compare the HOA’s income and expenses for a given period. However, as many HOAs lack accounting and finance experience, it can be a struggle to deal with bookkeeping tasks and responsibilities. If you need help in this area, it might be time to consider a HOA bookkeeping service. This can start with generic accounting software—thinkQuickbooks—but you really start to see time savings and ROI with tools that are purpose-built for association and property management. For example, CondoWorks can automate the accounts payable process while Alliance Association Bank seamlessly integrates your banking and accounting platforms.

Understanding The Importance Of HOA Accounting

• We handle homeowners’ tax returns with precision, ensuring accuracy and compliance.
• The balance sheet includes insurance because it’s usually paid for in advance and then capitalized on the report.
• Therefore, it’s crucial to consider the specific needs and circumstances of your association.
• This income and expense require monthly accounting tasks be completed.
• The unique financial structure of homeowners associations requires intimate knowledge of how they operate.

Our accountants have worked with the top accounting firms in the world and have years of experience working in HOA management. Join our blog newsletter to stay up to date on property management industry insights. However, it also doesn’t hurt to go the extra mile and take some time to familiarize yourself with federal, state and local tax laws, as well as to take advantage of tax-advantaged accounts. Doing this initial prep up front gives you the time to make adjustments as needed, spot any surprises in your books, and avoid errors that all too often come with a time crunch. Next, the timing for notification depends on your current management agreement – has it expired, is it ending at the end of the month?

• Don’t forget to check client reviews and references to assess their reliability and performance.
• Well, as you may have already discovered, there are many things that can go wrong – which makes for a logistical nightmare if not managed properly.
• From essential reports and accounts payable best practices to webinars dealing with collections during a pandemic, Community Financials has got you covered.
• As a board member of a Homeowners Association (HOA), understanding the fundamentals of HOA accounting is crucial to managing homeowners association accounting rules and community finances effectively.
• In some cases, members of the community might take legal action against your board for mismanagement.

Some have their own laws that dictate what homeowners associations can and can’t use. For instance, even though there are three accounting methods, California law directs that HOAs should use the Accrual Basis when preparing their pro forma operating budget. Your general ledger is where you record all of your accounting transactions following the date of occurrence and a numerical order you set known as the HOA chart of accounts. We provide a seamless and secure way for your homeowners to manage their financial obligations and make payments for assessments, dues, and other fees from anywhere at any time. Auditing and assurance services to verify the accuracy and reliability of the HOA’s financial statements and other financial records.

Get out your current service agreement and scan down until you get to the termination paragraph. Typically this paragraph states that the agreement can be broken a) for any reason with day written notice or b) immediately if “cause” such as negligence. Our online bill approval system requires two Board members (with their unique login) to review all invoices and approve them prior to payment.

Professional Accuracy

You’ll need to record the reports Online Accounting using financial software, such as QuickBooks. PayHOA offers tailored bookkeeping solutions for all types of homeowners associations. We designed our services with flexibility in mind so our team can meet your unique HOA requirements.

Then we will mail out a welcome letter to owners with payment options, our contact info and how owners can set up online access. We will start setting up your community in our software after we receive a signed agreement and our on-boarding checklist with your answers to questions like your tax ID, fiscal year end, etc. The first place to start your HOA accounting transition process is for your Board to have reviewed our proposal and our service agreement, had your questions answered and decided to work with us. Community Financials offers our clients a simple and inexpensive way to avoid paying attorneys for delinquent fees and their costs which they may or may not recover for the association.