Best Practices For Organizing Accounts Receivable And Payable For HOAs/COAs
Managing a homeowner association (HOA) or condominium association (COA) means you’re responsible for many aspects of your clients’ finances. This includes organizing accounts receivable and payable. In HOA/COA accounting, the term “accounts receivable” refers to any outstanding money owed to the association. “Accounts payable” refers to bills or invoices the association needs to pay.
HOA/COAs aren’t businesses that sell traditional products or services, so you’ll be dealing with accounts payable more often than accounts receivable. However, it’s important to follow a set of guidelines that covers both types of accounts. Keeping track of your clients’ accounts payable and receivable will help you make sure the HOA/COA stays financially healthy.
Organizing the accounts payable and receivable gives you a sense of the association’s assets, cash flow, and liabilities. As a manager, you’ll need to share this financial data with the HOA/COA board for annual audits, budget meetings, and tax preparation. Start by using HOA/COA accounting software like CINC Systems. Then, incorporate the following ways to better manage your accounts receivable and payable.
Import Vendor and Client Data to Your Accounting Software
First, go digital. When you’re tracking the HOA/COA’s finances on paper, it can be difficult to keep everything up to date. Using physical ledgers and paper files can get overwhelming even for the best managers. By switching to accounting software, you can store all your vendor and client data in the cloud.
To do this, open your accounting software and follow the program’s instructions to create account profiles for every vendor used by the association. Once this financial data has been imported, you’ll be able to keep the information updated with the click of a button. You can also use cloud accounting data to autofill invoices and receipts.
By importing vendor and client data into your cloud-based HOA/COA accounting software, it will be easier than ever to track accounts payable and receivable.
Create an Online Payment Portal
Next, use your HOA/COA accounting software to create an online payment portal. This serves two functions. First, it allows you to manage your clients’ accounts receivable more easily. Residents who owe fees to the association can submit their payments directly via the payment portal. This eliminates time spent depositing checks at the bank. It also enables you to automatically track who has paid and who hasn’t.
Second, an online payment portal provides a convenient solution for accounts payable. Vendors can submit their invoices online or via email. You’ll receive electronic notifications letting you know when each bill needs to be paid. Then, you can complete the invoice entirely online. This speeds up the billing process, ensuring that your clients’ HOA/COA remains in good standing with their vendors.
Automate the HOA/COA’s Monthly Expenses
Automating the HOA/COA’s monthly expenses is another best practice for organizing accounts receivable and payable. Most HOA/COAs have recurring maintenance costs. These costs can include utilities as well as regular services like landscaping, facility maintenance, and security. By paying the association’s bills automatically, you’ll be able to ensure that your clients’ finances are always up to date.
Using HOA/COA accounting software, import the account data for all the association’s recurring vendors and services. You’ll be able to send electronic payments on a regular monthly schedule. If a vendor has an extra expense, or you’re only using their services for a short-term contract, they can also submit invoices to you directly online.
Reduce Payment Terms via Email
In general, HOA/COAs don’t generate income outside of annual resident fees. As previously mentioned, this means you’ll be handling accounts payable more often than accounts receivable. However, there are a few cases where money will be owed to the association. For example, if the association rents a common space to an individual or group for a private event.
When a third-party owes money to the association, you can assist your client by reducing the payment terms via email. In a traditional contract transaction, the standard period for repayment is 30 days because of time needed for processing paper invoices via mail. When you send invoices via email and provide an electronic payment option, this lets you shorten the payment due date. Shorter payment due dates are a great way to improve upon accounts receivable when managing an HOA/COA.
Use Multiple Payment Methods
For another best practice regarding HOA/COA accounts receivable and payable, use multiple payment methods. With association management accounting software, you can use a feature called automatic bank reconciliation to sync your software to your client’s financial accounts.
Bank reconciliation gives you a real-time snapshot of each account’s balance, as well as pending transactions. When paying bills for the association, you may wish to withdraw from multiple accounts rather than a single source. This helps with balancing the books and ensures the association remains in good financial health.
Maintain Good Business Relationships
As an HOA/COA manager, you’re often acting as the public face of your clients’ association. This means it’s very important to maintain good business relationships with vendors and contractors used by the association. However, maintaining good business relationships is also important for accounts receivable and payable.
When someone owes money to the association, they’ll be more likely to pay promptly if you have a solid working rapport. Similarly, a positive relationship with vendors and service providers can offer you more leeway if you ever need to get a payment extension for the association.
Use Credit Wisely
Finally, make sure your list of best practices for HOA/COA accounts receivable and payable includes guidelines about credit. Always use credit wisely. If the association has a line of credit for smaller, day-to-day expenses, pay off the balance each month. For making larger purchases on credit, discuss the decision with your clients ahead of time.
Organize Accounts Receivable and Payable with CINC Systems
Using accounting software that’s specifically designed for HOA/COAs will help you manage your clients’ HOA/COAs more effectively. Try CINC Systems today and see how it makes a difference in your daily financial management tasks. To request a free demo call (855) 943-8246.
Related Frequently Asked Questions
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