In the world of Homeowners Associations (HOAs), the need for accurate financial management is paramount. Some HOA boards, in an attempt to handle their finances internally, often find themselves facing various challenges that could be easily mitigated through professional assistance. This article explores some common mistakes HOA boards make and why your association is better served by handing off financial reporting to a professional management company.
1. You’re Using Manual Bookkeeping Methods
One misstep made by HOA boards is relying on manual bookkeeping methods. In an era dominated by advanced technology, manual processes are prone to errors and inefficiencies. Transcription mistakes, miscalculations, and overlooked transactions can all lead to inaccurate financial records. Community management companies often have separate accounting departments and use modern accounting systems to automate these processes via secure integrations directly to the bank, reducing the risk of errors and ensuring that financial records are up-to-date and precise.
2. There is a Lack of Financial Expertise Within the HOA Niche Among Board Members
Boards are typically comprised of volunteers from the community, and while their dedication is commendable and the experience is broad, not all members may possess financial expertise. Board members with extensive knowledge of financial practices quickly recognize that practices specific to not-for-profit financial reporting have nuances that must be understood. Managing an extensive budget requires a level of financial acumen that may be beyond the scope of volunteer board members or requires a time commitment that they are unable to give. Community management companies bring seasoned financial professionals to the table, offering a wealth of experience in community association financial management. This expertise ensures that financial decisions are well-informed and align with the association's best interests.
3. You’re Making Costly Mistakes Through Inaccurate Bookkeeping
Inaccuracies in financial records can have far-reaching consequences for HOAs. From budgeting errors to legal complications, the financial repercussions of mistakes can be costly. Mismanagement may result in disputes with service providers, delayed projects, or even legal action. Community management companies implement rigorous financial controls and audits, minimizing the risk of costly mistakes. This proactive approach helps community associations avoid financial pitfalls and maintain a stable financial foundation.
4. Your Association is Over-spending on Services and Utilities
Community associations often engage various service providers for maintenance, landscaping, and utility services. Without proper oversight, there is a risk of overspending on these services. Community management companies have established relationships with reputable service providers. They can negotiate cost-effective contracts on behalf of the association using their scale since other customers of the management company may also use the same service provider. This ensures that the community receives quality services at competitive rates, optimizing the use of financial resources.
5. You Aren’t Regularly Collecting Fees
Timely and consistent collection of money owed to the association is essential for maintaining the community's financial health. When assessments and fees are not collected regularly, the HOA may face cash flow challenges, hindering its ability to meet financial obligations. Community management companies implement efficient collections processes, utilizing technology to streamline payment procedures. This not only ensures timely collections but also fosters a more stable financial environment for the community.
In the landscape of HOA management, accurate financial management and reporting are the cornerstone of community association operations. Recognizing the challenges HOA boards face in managing their finances, community management companies offer a viable solution. The board’s fiduciary responsibility towards the association includes the responsible delegation of functions to subject matter experts, which insulates the individual board members from liability. By leveraging technology, financial expertise, and efficient processes, management companies confidently empower boards to navigate the complexities of financial management. Partnering with a community management company is not just a smart choice; it's a strategic investment in the financial well-being of the entire community.
About Community Association Management Services
In business since 1991, CAMS is North and South Carolina’s premier community management company. With experienced local managers in each of its nine regions, CAMS provides innovative solutions to the community associations it serves. Additionally, CAMS was featured on Inc. Magazine’s 2022 Inc. 5000 list of the fastest-growing private companies in America. To learn more, visit www.camsmgt.com/choose-cams.
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