HOA Income Statements
Unlike a balance sheet which shows a quick snapshot of HOA finances at a certain point, the income statement shows financial information over a period of time. Usually, the period of time is the rate at which you prepare your financial documents whether it be monthly, quarterly, or annually.
The income statement is considered the most important document within the financial statement because it shows the financial direction, whether that be positive or negative, of the community association.
What Information Should Be Included
There are four items that should be included in an income statement:
- Gross profit
- Operational expenses
- Gains and losses unrelated to operational costs
- Net income
Gross profit is all the money that was made over the time period. If you submit financial documents monthly, it should be all the funds raised within that month. That should include any dues, fees, charges, or donations collected.
Operational expenses would be regular fees such as property maintenance, pool cleaning, landscaping, etc. Anything that is a recurring charge necessary to keep the community up and running.
All other one-time expenses would fall under the Gains and Losses category. Because the income statement shows finances over a certain period of time, any extra expenses need to be reported. If the community playground needed new mulch in March, that expense should appear in that month’s income statement, even if it means the association did not make as much money in March on paper.
Net income is the result of taking gross profit and subtracting all expenses for the period. This is the magic number that the entire report is based on. If your report comes out showing a positive net income, then your association did well and you can put some money in the reserves. If your net profit came out negative, then you should take a deeper look into your finances and see where improvements can be made.
Be as Detailed as Possible
All categories should be broken down to be as detailed as possible. For example, gross profit should be broken down between dues, fees, and any other source of income for that time period. Operational expenses should be broken down into landscaping, pool cleaning, etc. The more detail included in any financial document, the more insight it will give to the association board of directors leading to better decision making and financial planning.
Ask the Experts
If you are still unsure about how to create a proper income statement, contact the professionals at CSM. We have years of experience working with HOAs from around the United States. With a wide variety of services, our goal is to give community associations all the tools and technology they need to be financially successful, while at the same time still allowing them to remain independent. To speak to one of our knowledgeable staff, contact us online, call us at 865.315.7505 or reach us by email at firstname.lastname@example.org. We have worked with homeowner’s associations in almost every state in the US and are experienced with state and national laws concerning HOA financial management. If you have any questions regarding HOA finances, ask the experts at CSM.