Today’s current economic landscape has many people—and many community associations—facing inflationary pressure. Due to this, products and services are more expensive and harder to get, making it difficult to save money and cut costs.
As a member of the board of directors, you’re responsible for maintaining the association's financial health. Appropriate budgeting is crucial, but it’s necessary to look for realistic ways to reduce expenses. Here are some tips to help your community save money, keep assessments stable, and make residents happy.
1. Review supplier and service contracts.
Several service providers who physically travel to communities to conduct work have had to institute fuel surcharges and minimum-trip charges to combat the recent increases in fuel costs. Now is a good time to review your community’s service contracts and what’s included. Look for:
- Ineffective or unneeded line-item services
- Promotions or referral specials
- Pricing paid sufficiently accommodates services rendered
If you find any discrepancies or are unhappy with the services rendered, talk to your supplier or services provider to see if they can work with you. Otherwise, it doesn’t hurt to consider bids and see what other vendors offer.
2. Check in on your reserve fund.
Some states, provinces, or HOA bylaws require an annual reserve fund analysis. Even if yours doesn’t, it’s imperative to check in on your HOA’s reserve fund each year. An HOA reserve fund is money set aside by a community association for additions to major components the association is obligated to maintain and future replacements and repairs that don't occur annually.
A healthy reserve balance ensures you can take care of needed repair and replacement projects, but it can do much more. Because interest rates continue to fluctuate during this inflationary period, review your return on interest and connect with your reserves banking partner to inquire about any new higher reserve interest-bearing programs. While the return and interest rate offered will vary by bank and depend on the account terms and conditions, this may ease some of your community’s financial burden.
3. Consider capital project funding.
If you don’t have adequate funds for projects and repairs, you might consider securing a loan or line of credit. For some, it might be better to borrow during a high-inflation period to complete a looming project now. By waiting, you’re not only allowing things to deteriorate but also facing the reality of increased costs. A capital project funding option can lighten the financial impact on community members yet maintain the beauty and integrity of your community. Additionally, a loan allows:
- Homeowners to pay their share over time to reduce the immediate impact on their personal finances instead of making one lump-sum payment.
- Needed repairs or improvements to be completed quickly.
- Property values to maintain stability by allowing structural problems to be addressed and repaired right away.
- The cost of common area improvements to be spread over time and assigns the cost of those improvements to the people benefitting from them the most.
Make sure to follow the restrictions set forth in the governing documents and consult your community’s attorney, CPA, and other necessary parties before moving forward.
4. Go paperless wherever you can.
One of the industry’s largest physical print companies required a 15.5% supplier surcharge increase last year. This was due to higher paper costs and strong wage inflation. By digitizing your print mailings, you can reduce expenses on postage and printing. Additionally, you can transition to a digital solution for greater efficiency and cost savings on the operational side. HOA technology can:
- Protect sensitive information and documents
- Streamline online payments from residents or to vendors
- Create greater transparency with easier access to key meetings
- Manage violations and improve enforcement
- Make it easier to communicate with homeowners
Many HOA technology companies provide free consultations or demos to help you understand their potential.
5. Talk to your HOA insurance agent.
Insurance can be one of the biggest expenses for a community. Because of this, sitting down with your insurance agent and reviewing your policy regularly is essential. While your governing documents may establish a minimum amount for your HOA insurance policy, it’s important to consider additional coverage to thoroughly protect your community. There is no one-size-fits-all approach to association insurance, and prices, situations, and needs fluctuate, so you may be able to make adjustments or shop around for another insurance agency to reduce your spending.
6. Create a plan.
Establishing the direction of the community and allocating resources are paramount to your duties as a board member. And there’s no better way to ensure both dollars and human resources get used wisely than to plan for what’s next. Meet with your community leadership team to assess how inflation and the current economic environment are impacting your operations today and in the future. Then, create a response plan that determines what next steps work best for your community. This plan should act as a roadmap on how the board will pivot to address the current situation and exhibit resilience moving forward. Consider engaging owners for feedback, as transparency and communication go a long way in building trust in the board.
The Beginner’s Guide to HOA Budgets
At Associa, we’ve spent countless hours helping board members set budgets and maintain financial stability for their organization. With our 43+ years of service to various HOAs and our staff of designated managers and certified accountants, we bring valuable insight and expertise in the HOA financial management space. Read our ebook, “The Beginner’s Guide to HOA Budgets,” to learn what HOA budgets are, how to set one, tips for communicating the budget, and much more.