Everyone wants to live in a well maintained association and HOA accounting plays a critical role in the eventual realization of this goal. One of the key objectives of any homeowners association is to appeal to its community, to earn the trust of its members. You want to be able to establish laws that result in long term maintenance and stability while minimizing overall costs. A healthy association is a big attraction for prospective buyers leading to better returns for sellers.
Many associations rely on unpaid voluntary services. Of course it’s free, so it’s easy to think that it is indeed the better choice. You’ll be saving little funds that would have been used in hiring HOA accounting professionals. Letting volunteers do the accounting also means that you as a community have a greater oversight of your finances and individuals might be motivated to give their all.
What these associations fail to consider is the high level of expertise necessary to effectively manage HOA accounting. Most volunteers hardly possess any knowledge of accounting, they may try but preparing and presenting budgets is no easy task. HOA accounting deals with a lot of things. There are monthly and annual reports that have to be developed and presented to the HOA accounting board in time. These reports include the balance sheet by operating and reserve fund, a reserve income and expense to budget, the operating income and expense to budget, general ledgers, bank statements. While it may not be impossible for volunteers to prepare these reports, it is highly likely that the work would take a large portion of their time which may be unwise as they also have to care for their families.
Modern HOA accounting also demands use of technology in creation and storage of financial information. Computers are being used in all major financial and HOA accounting have to toe the line for easy engagement with these institutions. However, accounting software is very complicated and as much as community volunteers may wish to help, if they can’t work with this software, they may not be very helpful. HOA accounting companies on the other hand have extensive experience working the software. They know which ones to use for which circumstances and even know where to get the best software. Most of them normally have commercial property management software that are designed specifically for homeowner associations.
HOA accounting companies are businesses and are therefore out to showcase their ability. They want more customers so they will want to work hard to prove their worthiness. As such the HOA accounting companies always try to ensure that client accounts are attended to as professionally as possible. They will help you comply with industry standards, and do so without favoritism. One of the major stumbling blocks of letting a volunteer do the job is the existing relationship between community members; how many times have volunteers passed on someone because that person is their neighbor? Moreover, HOA accounting accountants will possess valuable contacts that they can turn to whenever necessary.
The truth is that associations have to pay for professional HOA accounting services and they can avoid this cost by working with volunteers. But you have to look at the long term benefits. You want a well-managed reserve fund; you want a consistently improving community; you want to impress potential buyers and consequently help raise home prices within the community. Hiring a full-time HOA accounting company will definitely improve the association’s chances of achieving these targets.
Clark Simson Miller is a HOA accounting company that provides accounting and back office support to hundreds of home owner associations across the country.
Photo credit: Dennis Jarvis