When running a homeowners association, there may not be one simple way to success. Some HOAs are self-managed while others choose to work with a homeowners association management company, and those have their pros and cons. But with enough strategy and planning, an HOA can be successful either way.
The secret is in following specific steps when managing HOA finances, such as the following:
#1 Have financial expertise.
At least one person on your board will need to know at least some of the ins and outs of HOA financial management. That’s usually the treasurer, but it could be other board members as well. Your property manager will have this knowledge too, but there needs to be someone on your board as well who can look at statements and financial reports each month to make sure everything is correct.
#2 Have proper insurance.
Are you properly insured? Make sure your HOA has all the coverage it needs, including fidelity insurance for theft, commercial insurance for damage, D&O insurance for board liability, and even car insurance for members driving for HOA-related reasons.
#3 Maintain your reserve.
Don’t forget to think long-term! The HOA reserve is crucial for ensuring your association can take care of any big replacements or repairs that come up over time. Every three years, be sure to update your reserve funds and conduct a reserve study.
#4 Always sign contracts.
For any major suppliers you work with, including landscaping companies, HOA managers, and maintenance companies, always work with them under a contract. And if pricing changes, be sure to update the contracts as needed for the new pricing.
#5 File your taxes.
That means federal and state. Invest in a CPA familiar with all forms and how they pertain to HOAs.
#6 Do audits regularly.
At least every two years, do audits to show that your HOA is doing well financially and to check in on our financial status during periods of big changes.