HOA Accounting Help: Top 5 Experts You Can Trust
Maintaining proper homeowners’ association (HOA) accounting measures is a key board responsibility, but it can be a task beyond the board’s professional capabilities. Whether or not board members have an accounting background, ultimately, the mismanagement of funds can have detrimental consequences. Read on to learn more about HOA financials and the accounting service providers who can help keep an HOA financially healthy.
What are HOA Financials?
At the core of HOA financials are the association’s income, expenses, and reserves. Activities like collecting assessments, creating a budget, managing reserve funds, conducting audits, and preparing HOA taxes all contribute to HOA financials.
Why are Professional HOA Accounting Services Important?
While some board members may have accounting knowledge, it might not be the professional experience needed to handle complicated taxes, balance statements, and budgets specific to community associations. HOAs are typically set up as complex organizations with unique taxation. Working with a skilled accounting service provider specializing in HOAs may help you avoid common accounting mistakes.
Learn more: “The Beginner’s Guide to HOA Budgets”
Common Financial Challenges for an HOA
HOA boards have a duty to manage funds responsibly, but a lack of planning and guidance may have consequences. Here are the most common challenges HOAs face when managing their finances.
· Mistakes in recordkeeping. Financial recordkeeping mistakes can end up costing you if they’re not caught and fixed quickly. Frequent errors include tax return mix-ups, inaccurate balance sheets, and overdue bills or expenses.
· Underfunded reserves. Depending on state requirements and your HOA’s governing documents, your board may have to retain a certain amount in the community’s reserves. Underfunded reserves might mean you don’t have enough to cover community repairs or necessary replacements.
· Inconsistent delinquency enforcement. While collecting unpaid assessments can be challenging, it must be done. Letting even a couple of delinquencies slide by can disrupt your association’s entire budget and lead to potential legal trouble.
· Auto-renewing contracts. It’s a good idea to regularly review contracts for renewal dates. Contracts with a Consumer Price Index (CPI) clause might result in higher costs. Contact existing contractors and confirm upcoming costs with a formal Request for Proposal so a surprise fee increase doesn’t disrupt your budget plans.
· Limited financial transparency. Homeowners trust board members to manage the community’s funds, so it’s crucial to be open and honest about HOA accounts and how it could affect them. Failing to share this information can lead to suspicion that funds are being mismanaged.
Top 5 HOA Accounting Service Providers
Managing a community association’s accounts is a significant job. Regardless of size, every HOA should think about partnering with a professional to assist with reporting and execution. Here are some of the top service providers who are directly involved in HOA accounting.
1. HOA Bookkeeper
A professional bookkeeper oversees the daily financials of a community, keeping records of all transactions that take place. Usually, HOA bookkeeping services include reviewing service contracts, managing bank accounts, creating or reviewing financial statements, overseeing billing and collections, supporting timely payments of invoices, and more. A professional HOA bookkeeper assists the board in maintaining regular checks and balances, so operations can continue to run smoothly.
2. Professional HOA Management Company
Many third-party management companies have skilled accounting personnel and employ the latest HOA accounting software to represent your association's finances and align with security and safety standards. A management company can also handle most day-to-day financial responsibilities, help with budgeting, keep records, and share recommendations to prevent special assessments. Supporting your community’s cost savings, a management company may be able to secure discounted rates for services or provide free board member training.
3. Certified Public Accountant
A Certified Public Accountant (CPA) is a qualified accounting professional who has passed the rigorous CPA exam and fulfilled other state Board of Accountancy requirements. An HOA CPA can help with tax preparation, accounting knowledge, financial monitoring, and more. Plus, many associations continue to be required—both by their governing documents and relevant laws—to engage in the services of a CPA.
Learn More: “The Ultimate HOA Tax Season Cheat Sheet”
4. HOA Board Treasurer
Likely a required board position, the HOA board treasurer acts as the association's financial manager. Although it’s not a necessity, it’s largely beneficial for a treasurer to have an accounting background and sound business judgment. He or she is responsible for the association funds and maintaining all financial records. From billing and collections to disbursement of funds, the treasurer runs and supports all things financial.
5. HOA Budget Committee
The budget committee typically manages the planning of yearly budgets and balances the annual income and spending to help the board assess and record the community's financial needs for the year. Often chaired by the HOA treasurer, committee members collaborate to draft a budget, evaluate expenses, set deadlines, present budgets, and make adjustments. With the budget committee focusing on these details, the board has more time to proactively lead the association.
How to Choose the Right HOA Accounting Services for You
An experienced HOA accounting service provider can greatly impact your community’s financial health. If you’re ready to work with a professional, here are a few questions to ask:
· Does the accounting professional have experience in community associations?
· Does our management team already offer financial expertise?
· Do their rates and services align with our budget and expectations?
· Does the professional come recommended or can they provide referrals?
Find Your Next CPA With This Sample RFP
A solid understanding of HOA accounting services is necessary for a community to have a bright financial future. With tax season in full swing, your CPA can help make this happen. If you’re on the hunt for your next CPA, download this sample RFP for your HOA CPA candidates. This request for proposal makes finding bids for accounting services quick and easy!