Condo communities and homeowners’ associations are typically set up as non-profit corporations. Just like for-profit corporations they have monthly income and expenses. This income and expense require monthly accounting tasks be completed. So what is condo or HOA bookkeeping or financial management? It is a specialty bookkeeping service that has expertise in providing these monthly accounting tasks for condos and HOAs.
Income Related Tasks
Collecting funds is the most important job when boards are surveyed about accounting tasks. Why? The association needs money to operate and provide vital services to owners. Income related tasks include: sending out assessment bills & coupons (monthly, quarterly, semi-annually or annually), collecting funds, depositing funds, applying late fees, mailing late letters, handling owner payment calls and emails and working with delinquent accounts with collection specialists.
Watch Out – We hear from some boards that deposits are not handled in a timely way which generate inaccurate late fees and causes owners grief and increases board work communicating with owners.
Additionally, if you don’t start a collections action on delinquent owners soon enough you may lose out on collecting the entire amount of money due the association depending on what state you are in. A best practice is to adopt a collection standard that complies with your governing documents and any state statues, distribute it to all owners and enforce it uniformly.
Expense Related Tasks
Paying bills is one of the most time consuming tasks for an association. Expense related tasks include: reviewing bills, approving bills, coding bills correctly with the right General Ledger (GL) code so your financial statements are accurate and paying bills. Plus handling vendor payment inquiries and creating year end 1099 statements for tax purposes.
Watch Out – We hear from some boards that vendors are not paid in a timely way. Not only do you incur the extra expense of late fees on bills, this increases calls from the vendor that you have to handle, annoys the vendor which can lead to slower vendor service or the vendor dropping you as a client.
Financial Management Tasks
Oversight of the association’s money is arguably the most important fiduciary job of the board. Financial management tasks include: Cash management to make sure you have enough money in the bank to pay bills before you make a payment; maintaining an operating bank account and reserve/ investment account(s) that prioritize safety, liquidity and return in that order; financial reporting to show the status of your funds so you can keep on top of your finances and stay on budget; and bank reconciliations to help safeguard your funds showing that what your financial reports portray matches what is in your bank account.
Watch Out – If you don’t have timely and accurate financial reports you may spend more than your income which can cause more work by needing a special assessment and cause owners grief. Additionally, if you don’t have visibility of your bank accounts (online viewing for more than one board member or monthly bank statements to all board members) or get a monthly bank reconciliation report you aren’t providing proper oversight to ensure you are not a victim of theft.
So what is condo or HOA bookkeeping or financial management? It is the combination of the income, expense and financial management related tasks for a community association. Depending on the size of the community they can add up to a large monthly chore. If you are a self-managed community this activity can take up a lot of time. If you want to offload this responsibility contact a specialty bookkeeping or financial management service like Community Financials and ask for a quote that you can discuss with your board.