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A well-formed HOA budget provides an accurate road map for community operations and future goals. It can be a challenging and time-consuming process. However, by starting on the first day of your current fiscal year and gathering the information necessary for your next budget, you can make the process easier and create a more accurate budget.

Although the board members are ultimately responsible for setting up their budgets, they may call on community association management companies for advice and assistance.

Steps to Creating a Practical HOA Budget

Take the following steps to form your HOA budget:

1. Use Accurate Monthly Financial Statements

Monthly financial statements provide a snapshot of the health of your company. Using association management software allows you to create them with specificity so you and your association can analyze the information down the road when it is time to form the next budget.

2. Generate a Thorough Business Plan

Your HOA business plan should include your financial targets for the coming year. A good idea is to outline your HOA’s annual goals according to month so that you know what to include in the budget. The board will need time to read and approve the business plan, so make sure it is ready for review well before the start of the fiscal year.

3. Send out Requests for Proposals (RFPs)

To ensure accurate vendor costs, send out a request for proposal (RFP) for each of your contracted services. RFPs help you eliminate budget guesswork for lawn care, pool management, landscaping, snow and trash removal, audits and tax preparations, and insurance policies.

4. Evaluate Utility and Maintenance Costs

To accurately evaluate the coming year’s utility, repair, and maintenance expenses, examine what your HOA spent on these things in the previous year. If you anticipate utility cost increases or items that may need to be repaired or replaced, add these amounts in as well.

5. Perform Regular Reserve Fund Analyses

It is wise to analyze your reserve fund regularly. Check your state’s regulations regarding how often a reserve fund study should be conducted. Regularly updating your reserve fund analysis confirms that community members are setting aside enough to provide for unanticipated expenditures for items like new roofs, parking lot paving, and playground equipment.

6. Enter the Numbers

Once you have the RFPs back from your vendors and have evaluated probable maintenance, repairs, utilities, and reserve fund expenses, input your figures into either a spreadsheet or a budgeting association management software like CINC Systems. For added clarity, it may be prudent to preserve your budget assumption notes and calculation methods as line item explanations.

7. Figure Your Expected Income

You then need to calculate all other income sources and arrive at the assessment fee amount each homeowner is obligated to pay. Do not include monies leftover from previous years, since HOAs practice zero-based budgeting. You should, however, incorporate late fee income, along with other reliable income sources. With expense and income sources budgeted, you can determine the assessment payment amounts.

8. Share Your Budget with Community Members

Distribute the approved budget to your homeowners according to your state’s guidelines. Keep in mind that your community members are entitled to see the budget. Transparency, collaboration, and cooperation are crucial for a thriving HOA.

Simplify Your HOA Budget Formation with CINC

Forming an accurate HOA budget might seem overwhelming. You can simplify the process by taking it one step at a time, giving yourself adequate time to gather information and perform the required work, and using association management software like CINC to streamline your budget’s formation.