The Right Bank For Community Association Is Important
Getting the financial orders of a community association well planned and prepared is vital to help a homeowners association run smoothly. Having these logistics planned and managed well keeps all association board members on the same page and in the know about current finances.
Before picking an appropriate bank for a community association it is imperative that other aspects of homeowner associations are also being taken care of and handled. Many homeowners associations have opted for having a management group oversee and handle aspects of the association that can get burdensome. It’s also important to take time in deciding on the type of financial system for your HOA. There are a few different options of what kind of financial system an HOA will use. There are a few options, and each come with their benefits and cons.
HOA Accrual Basis of Accounting and Finances
One of the most well used financial systems for HOAs is the Accrual Accounting method. This method is the most detailed and organized, and works by accounting and documenting all expenses and financial changes.
Budgeting is much easier when using an Accrual Accounting financial method. Because of the accuracy and ability to see up to date reports of how finances are doing, this gives board members time to make changes or get funds for projects, emergencies, or to save for emergencies.
HOA Cash Basis of Accounting
Although using a Cash Basis of finances in an association is considered easier, it can be inaccurate, easy to overlook issues and could cause misjudgments and when the time to budget comes around things could be more difficult.
The Cash Basis of HOA Finances uses only cash, and only cash transactions are recorded. This can get very confusing if more than one person has anything to do with the money of the HOA.
It can also be difficult to account for money that’s missing. If it wasn’t written down and a receipt can’t be found, it can wreak havoc on even the most simple task of providing reports for board members before a vote.
Combining Accrual and Cash-Based Finances
One option that some associations decide to use is one that combines aspects of both Accrual and Cash-based finances. Whichever aspect used would be decided by the board members.
Overall, management companies and seasoned HOA members have learned that accrual-based financial management of an association is the best. From pulling reports before drafting the budget for the next year to being able to pay for emergency expenses this method makes all aspects easier, more streamlined, and with less of a chance of mistakes being made.
The Best Bank For A Community Association
Keeping the HOAs money safe and secure is imperative. Not only this but ensuring that the bank that your association decides to use has experience in banking for homeowners associations. With so many options in banking nowadays, it’s vital that the decision-maker about which bank to use know these differences and is comfortable speaking to the institutions to find out how it can help and benefit the community.
Not Every Bank Specializes in HOA Finances
One thing that is important to remember is that not all banks a person will encounter both online and in person handle associations money, savings, and banking needs. Although some people may just go to any bank they are comfortable with, shopping around and finding ones that have worked with HOAs will be easier on your management team and benefit the association.
Banks Need to Know How to Handle HOA Finances
With members mailing and sending in their fees and dues, many times there can be errors. Most banks would only deposit the money and move on. However, a bank that specializes in homeowners associations will have checks and balances in place to help catch and notify the HOA and member of any errors.
One of the most common is that a coupon or voucher wasn’t included in the mailed envelope. This would be noted as a “No Doc” by the bank and alert the HOA to contact the resident.
Banks that don’t work with HOAs typically won’t have this type of system of checks and balances in place. This is one perk of using a bank that works with associations and knows these tiny aspects that help the management team and keeping financial records straight.
Clark Simson Miller Can Help You Manage Your HOA Banking
Do you need help managing and handling your HOAs banking, finances, and management needs? Give us a call at (865) 315-7505 or contact us online and we can help guide you in making the best decisions for your association. Talk to you soon!