One of the most critical aspects of the work of an HOA management company is to analyze the economic expenditure and to use optimized financial techniques to create cost-effective budgets and generate safe monetary funds for the community association. This demands a financial system designed to focus on articulating revenue generation and economic spending of financial resources.
To create an economical yet robust financial system, the HOA manager, along with the association’s financial attorney, utilizes specific techniques for business operations which include the use of different instruments of the financing world, from accounting to the investment in fidelity bonds if you are interested in learning more about how to manage your HOA finances contact flagstaff hoa management companies today!
Different financial techniques used by HOA managers.
- Accounting Methods.
Accounting relates to recording and reporting various financial transactions of the association funds, including revenue generation and revenue expenditure and reporting of associations assets and liabilities. Following are the generally used types of accounting in HOA management systems.
- Accrual basis accounting
In this type of accounting, the management company will record the revenue when it is generated and not when collecting the cash and by recording the expense transactions are completed. It precisely explains the management company’s and association’s financial spending power.
- Cash basis accounting
Small organizations or associations mostly use this method with limited spending power. In this method, the association’s taxes are paid through the accounts of the executive body of the association, and the recording of revenue and expenses is done on a cash level, providing a straightforward way to track the association’s cash flow.
The accrual basis of accounting complies with Generally accepted accounting principles, and cash basis accounting is not in compliance with Generally accepted accounting principles.
- Budgeting and Auditing.
Executive body and association policies for the coming year should be precisely stated in the annual budget to accomplish the articulated plans. A sincere analysis of Hoa’s financial transactions should be done to ensure the association’s integrity of its fiscal proceedings.
- Reserve funding plans and cost forecasting.
Articulating plans and execution of policies for reserve fundings accounts which will cover the revenue expenditure for future events and agenda regarding expansion or renovation of the entities. To keep up with the unstable economic conditions and the market, consider the factor of inflation and factor increase in the future in the future in the annual budget.
- Financial risk management
To monitor and prepare for possible threats that might increase the possibility of unstable conditions in financial matters of the association.
- Use of online software.
Utilization of online tools and application packages to automate repetitive activities instead of recruiting the additional staff.