How Much Does Financial Management for a Condo Community or HOA Cost?
One of the first questions potential financial management clients want to know when they call our company is: how much does financial management for a condo community or HOA cost? Although this is a very difficult question to answer, I will try to do my best here to explain some of the general pricing guidelines.
The bottom line is you get roughly 55% of the services provided by a property management company at 50% or less of the cost of “full management”.
A lot of services are included: generating unit owner assessment billing, depositing payments, communicating with unit owners on their accounting questions, receiving, logging and paying bills, communicating with vendors on payment inquiries, compiling the monthly financial statements, reconciling financial statements with bank statements, answering board questions on financial statements plus many administrative tasks.
From this list of community bookkeeping activities there are a set of tasks that must be completed and take roughly the same amount of time no matter the size of the community. Therefore companies will have a minimum service fee.
More Unit Owners = More Work
With more unit owners comes more payments, more late fees and a higher call and email volume to answer. For these reasons pricing is based on the size of the community. In the industry most pricing is based on and referred to as “a price per door”. The price multiplied by the number of doors is your monthly base service fee. This is the price given for the labor to perform the tasks listed above on an ongoing monthly basis.
Overhead is Included
The “per door price” includes general overhead expenses. Costs like phone charges, software, personnel related expenses, rent, utilities, insurance etc. are all included in the base service fee.
Usage Fees
In addition to the basic service charge there is a variable component based on what materials are used. Some communities use coupon books, some use monthly mailed statements, some email more so the only fair way to charge is to bill the community if and when they use these materials. Some other examples are postage, copies and additional community mailings like sending out newsletters for example.
Unit Owner Fees
Unit owners will request or cause additional work that create a direct charge or charge back to them as well. Some examples include non-sufficient funds (NSF) charges for bounced checks and a “convenience fee” charged by the bank if they choose to pay their assessment by credit card. Also when a unit owner gets a new loan their lender requires certain financial documents and a “lender questionnaire” to be completed. Lastly, a delinquent unit owner causes additional work starting with a series of mailed late statements and collection letters, and then can proceed to legal and other charges if they are turned over to a collection attorney. These items are charged against the delinquent owner’s account.
Additional Services
Some items a board may want help with may not be included with a financial management service. Depending on the capabilities of the company you hire they may be able to help you with extra tasks for an additional fee. Here are a few examples: Creating budgets, going through a prior period’s financial reports to track down expenses (a form of audit), adding prior months’ income and expense reports into the new accounting software if you start service mid-fiscal year. Also, some companies may have an administrative assistant on staff that can help the board with special projects. These additional services are billed by the project or at an hourly rate.
Special Plans
A condo community and homeowner’s association bookkeeping service may also offer special pricing plans. One potential option is to pay for a year’s base service up front to receive a small discount. The community wins by saving more money and the service wins by improving its cash flow. Another special pricing plan is an all-inclusive option. In addition to the regular plan for a base fee and a variable charge the service may offer a plan that has no extra charges (for predictable service items) at a higher monthly fee.
Summary
Many accounting activities are included in a financial management service. By using a financial management service the association will save a substantial amount of money from what they were paying for traditional “full management” while still getting about 55% of the work done which saves a huge amount of time. If you are interested in learning more about bookkeeping and administrative services to see if it is a fit for your association contact Community Financials to schedule a free consultation and receive a detailed quote.
