HOA Accounting Best Practices You Need to Know About
As a homeowners association (HOA) manager, your clients rely on you to assist them with managing their finances. This is a significant responsibility that shouldn’t be taken lightly. As the HOA manager, you’re in a position to help the association create and maintain a strong foundation for lasting financial health. To ensure your clients’ fiscal success, it’s important to implement certain accounting best practices.
These accounting best practices for HOA financial management require organization, dedication, and attention to detail. However, you don’t need a background as a CPA or a financial expert to implement these policies for your association management business and your clients. With these best practices, you’ll be able to streamline all aspects of financial management for your client’s HOA.
Understand State and Local Laws
As you undertake the financial management for your client’s HOA, it’s important to understand state and local laws. Many regions have specific rules that may affect the governance of an HOA.
For example, in some states, the HOA is required to hold an annual audit regardless of whether the board or HOA members have requested one. Some states also have guidelines about how financial data is reported to the HOA’s board.
Make sure you know the legal requirements that pertain to each of your clients’ HOAs so that you can provide the most accurate accounting services.
Use Cloud-Based HOA Accounting Software
Another best practice for HOA accounting is to use cloud-based HOA software, such as CINC Systems. Cloud-based accounting software is a type of program that stores your financial data remotely across multiple servers, known as the “the cloud.”
This offers multiple advantages over traditional accounting software. Cloud-based HOA accounting software is more secure because the data is encrypted. You’re also protected against hardware failures; if your computer crashes, your client’s data is safe in the cloud.
Plus, cloud-based accounting software enables you to manage your HOA clients’ finances from any location remotely. This enables your HOA management company to go mobile.
Setup Online Payment Portals
When performing HOA accounting duties, the best practices are the ones that streamline your business and provide a more optimized service for your clients. One way to do this is by setting up an online payment portal using your association management software.
With an online payment portal, the HOA’s residents can pay their fees and assessments electronically. The funds are automatically deposited into the HOA accounts. You’ll save time by avoiding the lengthy process of collecting and depositing checks.
You can also use HOA accounting software to generate a list of which residents have paid and which ones are delinquents. This makes it easier to issue warnings and follow up with potential citations or liens.
Create an Online Vendor Directory
We also recommend creating an online vendor directory as an HOA accounting best practice. In your role as the HOA manager, you’ll often find yourself dealing with vendors on behalf of your clients. This may include contractors, plumbers, electricians, landscapers, and other service professionals.
When you need to hire a vendor to perform work for your client, it’s important to choose the vendor with the best value and remain within your client’s budget. By having a directory of vendors you’ve already worked with, and knowing what their rates are, you’ll be able to save time because you won’t need to hire new workers.
Balance the Books Electronically
Balancing the books is vital to maintaining a fiscally sound HOA. It’s recommended to do this electronically as an accounting best practice. By balancing the books in your HOA accounting software, instead of doing it by hand, you can help eliminate errors and ensure accuracy.
Whether you’re working with the general ledger, reserve fund or accounts payable/accounts receivable, do your bookkeeping with HOA accounting software such as CINC Systems. CINC Systems automates many of the processes involved with balancing the books and gives you an accurate real-time update for each of your clients’ financial accounts.
Use HOA Accounting Software to Pay Bills
No one likes to pay bills. Whether it’s a bill for your HOA management business or one for your client, the paperwork can quickly add up and become a hassle. But did you know that you can use most HOA accounting software programs to pay bills online?
For your clients, this is another HOA account best practice that we recommend. Use your HOA accounting software to set up automatic payments for any of your clients’ recurring bills, from utilities to landscaping.
Monitor Financial Transactions in Real-Time
Unfortunately, HOAs are at risk of financial fraud because so many individuals have access to the association’s financial accounts. One of your responsibilities as an HOA manager is to help protect your clients from fraud and other forms of financial abuse. To do this, make it a best practice to monitor your clients’ financial transactions in real-time.
Use your HOA management software to perform automatic bank reconciliation, a feature that syncs each of your client’s financial accounts to your software dashboard. This means you won’t need to login to multiple bank websites to see the account balances. Plus, accounts are updated in real-time.
This means you’ll be able to see each transaction as it occurs. If a particular financial transaction looks suspicious, you can flag the activity, report it to your client, and take appropriate action to prevent further problems.
Perform an Annual Audit
An annual audit should be part of every HOA’s financial best practices. In some states, HOAs are required to perform audits due to local law. In other states, the association’s members can force the board to perform an audit by majority vote. Whether or not your clients are required to hold an annual audit, it’s still a good idea.
This is because financial audits provide valuable information about the HOA’s fiscal health. The data revealed by an HOA audit can help the board make important decisions about budgeting, fees, and more. Additionally, if the HOA is in poor financial health, an audit can help diagnose the problem and highlight the steps you and your clients can take to solve the problem.
Try CINC Systems
To see how CINC Systems association accounting software can help you implement these financial best practices for HOAs, request a free software trial now.
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