Financial management is the process of planning, controlling, directing, and organizing an organization’s financial resources. When a community association manager steps into the picture, managing a homeowners’ association’s (HOA’s) finances is one of their primary duties.
Proper financial management requires diligence every step along the way. Careful planning, record keeping, and reporting are crucial components to demonstrate to homeowners and the HOA board that their resources are handled responsibly.
Continue reading to learn the top seven financial management techniques for successful business operations:
A budget provides an HOA’s financial framework by establishing the association’s services to homeowners and how much residents will need to pay in assessments. It should be a realistic reflection of the board’s policies and decisions about what will be accomplished in the coming year.
Independent accountants should do a thorough evaluation of the HOA’s finances every year or so. This will reassure homeowners their resources are being managed with integrity and in the association’s best interests. It can also point to weak managerial areas that need attention.
Risk management involves looking ahead to potential risks that could affect the association’s finances and taking steps to monitor and plan for them. For example, consider whether the community is located in an area prone to natural disasters. To manage this risk type, you could choose to put a disaster plan in place and establish a reserve fund for unexpected clean-up costs.
Adequate Reserve Funds
In addition to reserve funds for anticipated risks, you should also plan for future expansion or renovations by establishing reserve funds. By paying into these accounts each year, the association can be prepared for the budget spike that will occur when the project eventually takes shape.
When budgeting, be sure to factor in expense increases like vendor fees. Suppose you can accurately forecast this increase in costs. In that case, the board can establish incremental assessment increases to cover the expenses and prepare homeowners for the new rates.
Staffing Level Management
It may be tempting to hire more help as your association management company expands; however, to maintain flexibility, it is often wise to look for other ways to deal with the extra workload. Hire contractors or freelance workers to do some of the work if possible. Additionally, using HOA management software like CINC Systems automates tasks so your current staff can do more in less time.
Accounts Receivable Oversight
Keep a close watch on money coming in, and make sure homeowners pay what they owe promptly. Accounts receivables must be consistent for the HOA to maintain the necessary cash flow for operations. Use CINC’s community management software with its collections module to monitor association income and homeowner delinquencies.
Every homeowners’ or condo association management company will use financial plans that sync with their own particular goals and needs. By using these seven financial management techniques and implementing CINC’s cloud-based software to manage your company, you can accelerate growth and maximize long-term profits.