HOA bookkeeping is an essential aspect of association management. However, as many HOAs lack accounting and finance experience, it can be a struggle to deal with bookkeeping tasks and responsibilities. This can result in financial mistakes that could harm your community. If you need help in this area, it might be time to consider a HOA bookkeeping service. Here’s how they can help ensure your community’s financial health.
What Is HOA Bookkeeping?
HOA bookkeeping is the process of recording, classifying, and retrieving all financial transactions of the association. It’s an accounting system that allows you to see your community’s financial health. A bookkeeper uses financial documents to ensure that all the books are balanced. If you’re learning bookkeeping for HOAs, here are important documents you need to know:
A Balance Sheet provides an overview of your association’s finances. In this document, you’ll be able to see how much money there is in your HOA bank accounts. It also contains a list of your assets, liabilities, and equity.
The Balance Sheet is also where you can find the Accounts Payable and Accounts Receivable statements. The Accounts Payable is a statement that lists all the unpaid expenses of the association. This includes maintenance costs, utility bills, and municipal fees. The Accounts Receivable is a statement that lists all the money owed to the association. This includes HOA fees, late fines, and other sources of income.
Statement of Income and Expense
The Statement of Income and Expense is important for HOA financial management. This document tracks all the money coming in and out of your accounts. You’ll be able to see income generated from HOA fees, late fines, investments, and loans. 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. You’ll be able to see if the HOA is under or over budget.
General Ledger is another important tool for proper HOA accounting. It’s a document that contains all the financial transactions of your association. As it contains a lot of details, the general ledger will give you an overview of your association’s finances. You can also use this document for a detailed look into your financial transactions.
Cash Disbursement helps keep track of all the money coming out of your accounts. It takes note of all checks issued by the HOA. This HOA bookkeeping document lists down when a check was issued, who it was issued to, the check number, and which account it will be withdrawing from. You can also add more specific details such as invoices and billing statements.
Who Takes Care of HOA Bookkeeping?
In a self-managed HOA, the board treasurer acts as a bookkeeper and oversees the community’s finances. However, HOA bookkeeping is a very complex and time-consuming process. If that person doesn’t have an in-depth understanding of financial accounting and management, he/she can easily become overwhelmed. If you have disorganized and unbalanced books, this can lead to many problems for your association.
As an alternative, many HOAs turn to expert financial management services. An HOA accounting and management company will be able to manage your community’s finances properly.
How HOA Bookkeeping Services Can Help Your Finances
If an HOA board does not have adequate financial expertise and experience, it might be in their best interest to outsource HOA bookkeeping to a financial management company. Though it will be an added expense for the community, the benefits far outweigh the costs—especially since not sorting out finances can lead to a lot of trouble for the association. Here’s how an HOA bookkeeping service can help protect your finances.
1. Clean and Accurate Bookkeeping
In order to properly manage a community, the board needs to have clean and accurate financial documents. A professional bookkeeping service will keep track of all the association’s income and expenses. There will be no confusion when it comes to balance sheets, income statements, and other financial documents.
2. Avoid Financial Issues or Errors
An HOA bookkeeping service will regularly monitor your finances, thus reducing or eliminating any financial issues or errors. They will be able to see quickly if there are any discrepancies such as unfamiliar invoices, double charges, or suspicious activity. If these issues are not caught early, they could potentially mess up your finances in the long run.
3. Easy Preparation for Annual Audit
Audits are usually performed at the end of each fiscal year. Some HOAs are required to perform an annual audit as stated in their CC&Rs. Whether it’s required or not, an annual audit is a good practice to have as it helps confirm your HOA’s financial health.
Usually, a CPA will come in and perform the annual audit. With an HOA bookkeeping service, all the financial documents they need are already readily available. You just need to pull up the reports and they will be able to check your bookkeeping.
4. Best Accounting Tools and Strategies
A professional bookkeeping service will have access to the best tools and strategies in the industry. They will be able to choose the tools and strategies that are perfectly suited for your HOA’s financial needs. You won’t have to waste time researching all the different accounting software and then learning how to properly use them.
5. Saves HOA Money
Believe it or not, a professional bookkeeping service will help you save money in the long run. You’re less likely to make financial mistakes with clean and accurate books. For example, if you do not keep track of accounts payable statements, you might end up spending more on late fees and interest. A bookkeeping service helps residents save money too. If HOA dues are invoiced and collected on time, residents won’t have to deal with late fees as well.
Consider an HOA Bookkeeping Service for a Happy, Financially Stable Community
Financial management requires a lot of time and effort. Not to mention, you also need a solid understanding of accounting and finance to properly perform HOA bookkeeping. By outsourcing to an HOA bookkeeping service, the board can focus their time on day-to-day operations and other more important community matters. You’re also able to avoid costly mistakes that will affect your financial health. Financial management allows you to have happy residents and a stable community.
If you want a company with HOA bookkeeping expertise, don’t hesitate to give us a call.