Splitting Accounting from Physical Management: A Smart Choice for Large-Scale HOAs and Condo Associations
For many large-scale HOAs and condo associations, managing finances can be a major challenge. With hundreds or even thousands of units to oversee, it can be difficult to keep track of all the financial details, from collecting dues to paying vendors to managing the budget. This is where splitting your accounting from on-site management can be a smart choice.
Hybrid Management or Split Mangement – Splitting the Accounting from the Physical Management – means that the onsite manager of the HOA or condo association handles the day-to-day physical management of the community, but the accounting is handled by an experienced HOA accounting firm like Community Financials. This approach allows the manager to focus on things like maintenance, capital improvement projects and community events, the Board to be less involved in hiring and training onsite accounting staff, and benefiting from the expertise and support of industry specific professional accountants.
Outsourcing finance and accounting from your PUD HOA to a dedicated accounting firm can be a viable and cost-effective option for large-scale HOA’s and condo associations. By considering the benefits and potential challenges, you can make an informed decision on whether this approach is right for your community.
Why Not Get Full-Service HOA Management?
There are several reasons why a large-scale HOA or condo association may want to avoid full-service management and instead opt for self-managed support.
Firstly, full-service management can be quite costly. Management companies often charge a percentage of the HOA’s budget as their fee, which can add up quickly for a large association. In contrast, outsourcing your accounting from a specialized firm like Community Financials can provide the necessary support and tools at a fraction of the cost.
Secondly, full-service management can result in a lack of getting things done. The management company’s lack of adequate staff, high turnover, leads to overwhelm and results in a lack of responsiveness from the company’s representative. Outsourcing your HOA’s accounting, on the other hand, allows the board to maintain control, reduce frustration around communication and know that the financial matters are taken care of by professionals.
Thirdly, there may be a lack of transparency when it comes to the management company’s finances. In some cases, full-service management companies may not provide timely and detailed financial reports to the HOA board, making it difficult for the board to track expenses and ensure that the community’s funds are being used appropriately. By outsourcing your accounting to a company like Community Financials, the HOA board can maintain full control over financial decisions and ensure that the community’s resources are being used effectively.
Overall, while full-service management can offer some assistance to a large-scale HOA, the costs, lack of transparency, and loss of control may outweigh the benefits.
Splitting accounting from physical management with the help of a specialized HOA financial management service like Community Financials provides the necessary tools and guidance for the board to successfully manage the association while maintaining transparency, accountability, and cost-effectiveness.
Why Not Manage All My Large-Scale HOA Finances Internally?
Managing finances for a large scale HOA can be a complex, time-consuming or expensive, and high-risk process. Listed below are the top reasons why a large scale HOA would be better off to avoid internal financial management (especially when working with an internal financial manager):
1. It Opens the HOA Up to Risk of Fraud
Internal financial managers may be susceptible to fraudulent activities, especially if they are not properly trained, monitored, and held accountable. As these Embezzlement Case Studies from Florida demonstrate, the lack of external oversight in large HOA financial matters often lead to an abuse of power and large monetary losses for the community members.
2. It is Expensive to Have a Dedicated Financial Manager On Staff
For large-scale HOAs, the cost of having a dedicated financial manager, and additional accountants on staff can be a significant burden on the budget. With the need to manage the finances of a large community, the cost of hiring and maintaining experienced financial professionals can add up quickly. In addition, the cost of training and professional development to keep up with the latest accounting regulations and technologies can also be significant – as well as medical benefits, payroll taxes, bonuses, vacation coverage, staff turn-over, etc.
3. It is Challenging for Existing Board Members Working “For Free”
Running the finances of a large HOA or Condo Association requires a high level of expertise in accounting, financial reporting, and tax preparation, which can be challenging for HOA board members without a financial background. Attempting to manage finances internally can lead to errors, missed deadlines, burnout, and legal issues that can cost the HOA thousands of dollars in fines and penalties. Larger communities have a lot of accounting transactions from collecting dues from each owner which also creates a communication bottleneck if the volunteer is not responsive.
4. It May Lead to Conflict Within the HOA
Managing finances internally can create conflicts of interest, especially when board members are also homeowners within the community. This can lead to bias and favoritism, which can erode trust among homeowners and lead to discord within the community.
By outsourcing a part of your HOA’s financial management to a third-party service provider, HOA board members can maintain impartiality and transparency and ensure that financial decisions are made in the best interest of the entire community.
5. It May Cause Legal Issues Due to Lack of Knowledge/Experience
Outsourcing financial management can help ensure compliance with state and federal laws, as well as industry standards. Professional HOA accounting firms have the processes, expertise and experience to stay up-to-date with changes in regulations and requirements, ensuring that the HOA is always in compliance. They can also provide expert advice and guidance on financial matters, helping the HOA make informed decisions that benefit the community as a whole.
In conclusion, while it may seem tempting to manage finances internally, it can create more problems than it solves for a large scale HOA. Outsourcing financial management to professionals can add efficiency, save time and money, prevent conflicts of interest, and ensure compliance with laws and industry standards.
Hiring Accounting Support for PUD HOA’s: Benefits and Considerations
As a board member of a large-scale HOA or condo association, you may be familiar with the challenges that come with managing a planned unit development (PUD) community. With a multitude of responsibilities ranging from landscaping and maintenance to financial management and governing documents enforcement, it can be overwhelming to keep everything running smoothly.
One option to consider is splitting the financial management from the general property management and outsourcing it to an accounting firm specializing in PUD HOA accounting. Here are some benefits to this approach:
Benefit #1: Safety & Increased Control Over Finances
By hiring an accounting firm to assist with bookkeeping, budgeting, and financial reporting, you can ensure that your community’s money is being managed responsibly and transparently.
Benefit #2: Cost Savings
Leaving the financial management to a company of professionals can also be more cost-effective in the long run compared to hiring a full-service management company or an internal financial manager. By only paying for the services you need, you can avoid paying for unnecessary overhead costs associated with traditional management companies.
Benefit #3: Flexibility and Customization
With outsourced finance and accounting services you have more flexibility and control over which services you want to prioritize for your community. You can customize the services you receive to fit your community’s unique needs and budget, rather than being locked into a one-size-fits-all package with a management company.
Benefit #4: Improved Communication and Collaboration
When you work with an accounting firm that specializes in PUD HOA accounting, you’re working with a team of experts who understand the unique needs and challenges of your community. This means you can benefit from their knowledge and experience, and work together to achieve your community’s goals.
Benefit #5: Less Change for Owners if a Manager Doesn’t Work Out
With the best of intentions sometimes a management company just doesn’t work out. Maybe it is poor service, a personality conflict or not sharp enough. By splitting the accounting from the manager’s role your owners don’t have to change their payment routine and system logins every time you hire a new manager. The systems and payments stay the same and you can hire another manager to handle the physical management.
Benefit #6: Preserve your Management History
We include the software with our service. The Manager and Board gets a login. All the history of the prior manager’s maintenance, violations and architectural requests are kept in our system for your future managers and board members to review. This helps with continuity within your large scale HOA or Condo Association.
Potential Challenges of Splitting Your HOA’s Accounting from Physical Management
While there are many benefits to outsourcing your accounting services, it’s important to consider a few potential challenges as well. These may include:
- Trust: Trust is a critical factor when working with an accounting firm. You’ll need to trust that the firm is reliable, honest, and will act in your HOA’s best interests. Trust issues can arise if you’re not confident in the firm’s abilities or if there’s a lack of transparency in their processes.
- Data Security: Your HOA’s financial data is sensitive, and it’s essential to ensure that it’s protected. When you outsource your accounting, you’ll need to trust that the firm has adequate security measures in place to prevent data breaches or other security risks.
- Cultural Fit: When outsourcing your HOA’s accounting, you’ll want to ensure that the firm you choose is a good cultural fit for your organization. If the firm doesn’t understand your values, goals, and priorities, it can be challenging to work together effectively.
The Community Financials Advantage
At Community Financials, we offer a range of services that help HOA boards and condo associations manage their finances more efficiently. Our platform simplifies bookkeeping and accounting tasks, generates reports quickly, and offers reliable administrative support.
If you are looking for effective ways to self-manage your large-scale HOA or condo association, we have got you covered. Our comprehensive services can provide you with everything you need to successfully manage the accounting of your master planned community or large association.