4 Tips For a Strong HOA Financial System
For HOA board members, checking the financial reports may not be at the top of your list of tasks to complete your role. Seasoned board members agree that knowing your association’s finances is vital for making good decisions for the association.
Keeping board members up to date and in the loop about the HOA’s finances should be a priority. Sadly many groups don’t put the right amount of emphasis and focus on having a good financial system. For associations who have put time and effort into creating a sound financial system have reaped the benefits of having financial records easy to view.
In this article, we are going to cover 4 tips that will help get your HOA, and it’s financing in order and readily available for board members.
Strong HOA Financial System Tip #1: Know Your Accounting Type
Knowing what kind of accounting and record-keeping type your association has decided to use is vital. With three main types of HOA financial systems that associations choose from, knowing why the one your association is using is essential.
Accrual Basis of Accounting
This is one of the most widely used types of HOA finances and is thorough. Accrual basis accounting takes account for every transaction of money. Unlike other systems that can get more confusing, this accounting system is excellent for keeping money tracked and board members in the loop.
Cash Basis of Accounting
Cash basis accounting is not the optimal choice for keeping HOA finances accurate or is more tedious to do. This method is based on tracking cash transactions and not keeping detailed logs and records. Although it may be easy to know how much money an association has, it can easily get messed up or incorrect if someone isn’t vigilant about keeping tabs on the cash.
Modified Accrual of Accounting
This method takes some aspects of both accrual and cash basis of accounting. Most HOAs either choose accrual or cash when picking a finance system.
From experience, the accrual basis of HOA finances may be a bit more work, but having the plans, records, and up to date information about the association’s finances is much more comfortable.
Strong HOA Financial System Tip #2: Complete an Annual Audit
Performing an audit of HOAs finance is an excellent way to ensure things are running smoothly. Even if it’s not required by any state or city laws, doing these audits will keep board members up to date with current finances.
Knowing what aspects of the finances need to be audited will come down to what state the association is in. Contacting an HOA management company will be the soundest way to ensure all the documents that are required are drafted and updated.
Strong HOA Financial System Tip #3: Add/Deduct From The Proper Account
Keeping finances in order is about organization and consistency. Making sure that any expenses are completed using the right bank account can create reports and current finances much easier to keep track of.
Having a system that anyone who would make purchases or expenditures would know what to do and how to document or pass along the proper documents to whoever is head over the HOA finances is equally important.
Strong HOA Financial System Tip #4: Keep Bank Account Security a Priority
Nowadays, for individuals and businesses, keeping banking information secure is vital. Debit and credit card numbers along with bank account and routing numbers are something that needs to be kept safe. Never store these openly on an electronic device in a “Note” or Word Document.
Knowing who has access to this information is also essential. It isn’t untrusting, but instead is ensuring that any funds and money is kept safe and secure.
Clark Simson Miller Can Provide A Strong Financial System For Your HOA
Many Homeowners Associations have found the many benefits of having a management company keep an eye on certain things. One of the most used is managing finances.
With our years of experience, the team here at Clark Simson Miller Accounting is always ready to answer questions and help guide customers on the best decisions for their HOA management needs.
Contact us online or give us a call at (865) 315-7505 and let us help you and your HOA get a reliable HOA financial system and keep board members up to date along with all other aspects of your HOA running smoothly and stress-free.