Why an Experienced HOA Accounting Team is Crucial
We have written many articles about the importance of experienced HOA managers: their roles & responsibilities, how to find the right fit and the significance of manager credentials. True, the manager is the day-to-day face of the management company to the association. However, managers are supported by teams of experienced professionals who provide essential services to ultimately deliver top-notch service to community associations.
One of the most important behind-the-scenes teams at the HOA management company is the accounting department. All accounting teams are important for any business — both for-profit and nonprofit — but an accounting team with specific HOA-related experience is especially crucial for a community association.
Accurate, complete and compliant financial statements
Most homeowners associations are nonprofit mutual benefit corporations and as such, they are legally required to maintain accurate financial statements at all times. An HOA also requires a steady influx and out flow of monies to support the protection of property values and membership’s enjoyment of their community. These assets and expenses must be meticulously tracked and managed on a day-to-day basis for the purpose of providing the board with a clear snapshot of the association’s financial status at any moment.
The HOA accounting team handles myriad financial responsibilities linked to the association running smoothly, including:
- Collection of assessments
- Pursuing delinquent assessments
- Generating financial statements
- Processing payments to vendors
- Association tax payments
- Generating general ledger reports that accompany every financial statement
Local teams provide answers quickly
If a board has questions about their HOA’s balance sheet, their manager will likely be able to provide most answers promptly. However, if there is ever a need to dig into the nitty gritty, the management company’s accounting team should be ready to step in. Many of the large national HOA management companies centralize their accounting teams, which can be located in a state that is far away from yours. Getting someone on the phone to answer a question can be a painstaking process, as the manager relays information between the accounting department and the HOA board. At Keystone, we believe in the importance of an accounting team that is located close to the clients we serve where the same accounting team becomes familiar with each client’s needs, so we can avoid the inevitable delays in communication that are a product of remote teamwork.
HOA accounting is a niche category and teams who work in this industry must be fully up-to-date with the requirements unique to financial management for homeowners associations. Accounting for HOAs is different than for-profit businesses.
For example, HOAs often opt to manage their finances on what’s called a “modified accrual” basis. This means that income calculation is accrued while expenses are filed on a cash basis. A Fortune 500 company may choose to accrue expenses across multiple quarters, but HOAs generally want to maintain speedy payments to vendors. As such, most expenses are processed on a cash basis in order to reduce the number of outstanding payables. This is just one example of how a specialized approach to accounting can benefit an HOA.
Remember, homeowners associations are nonprofit corporations. This means that all money that comes in must be subsequently paid out to vendors, allocated to reserves, or applied to the following year’s expenses. Therefore, it’s imperative that the accounting team understand the nuances of the accounting regulations that apply to homeowners associations.
Full team support
Even small associations require lots of support in the day-to-day management of their financials. Our accounting teams, led by a CPA, are comprised of multiple individuals, each playing a critical role. Two staff Association Controllers are responsible for producing detailed, accurate financial statements on behalf of each community we manage. They also provide training to board members on HOA accounting best practices. This education can help the board increase their understanding and further support their decision making on behalf of the association. Working under each of our Association Controllers is a Senior Staff Accountant who monitors the general ledger for each association. Our team also features multiple Staff Accountants who possess knowledge and experience specific to the accounting needs of homeowners associations. Finally, the Accounts Payable and the Accounts Receivables teams provide essential operational assistance in the association’s daily financial operations.
Though most of these important accounting team members may never meet the board or membership of the associations they oversee, their experience and immersion in an HOA’s financials plays a vital role in helping an association succeed. Look for an HOA management company that provides full-suite accounting teams with a long history of overseeing homeowners associations.
Need help understanding your association’s financial statements? Our friendly HOA accounting teams are ready to help.Posted by on | Categories: Community Management, HOA Board, HOA Management, Property Management Company.