To be successful, it’s crucial for homeowners’ associations (HOAs) to manage finances effectively. As elected leaders, residents rely on the board of directors to responsibly handle their money, make smart decisions, and keep their HOA in good financial standing. While this is a significant undertaking, there are things boards can do to keep finances in check and residents happy. Read on for five tips to maintain your HOA’s financial stability.

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1. Stay on top of dues collection.

HOAs are typically responsible for maintaining community common areas and amenities, and residents must pay regular fees to cover the associated costs and fund other operational expenses, like insurance and utility bills. Also referred to as dues or assessments, residents are legally required to pay these fees. To ensure the HOA stays financially healthy, boards need to stay on top of collection efforts and hold residents accountable for payment. If boards ignore delinquencies, it can negatively affect the budget and administrative procedures and lead to legal trouble, frustration, and special assessments.  

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2. Regularly audit vendors and service contracts.

Many HOAs and management companies partner with vendors, contractors, and professional providers that deliver specialized services. Boards should conduct a thorough review of all annual supplier and vendor contracts to make sure you’re getting what you paid for. Take advantage of loyalty discounts and seasonal promotions and consider discontinuing services that aren’t up to par or are no longer needed to reduce costs. Don’t be afraid to shop around if a vendor is too expensive or inconsistent in their work. However, you must do your due diligence, get multiple bids, hold interviews, and read client testimonials and reviews before making the switch. Neighboring communities and your community manager may have great referrals.        

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3. Partner with financial experts.

Managing your HOA’s finances is a big job, and board members don’t always have the time or knowledge to do it correctly. If this is the case, think about outsourcing your accounting tasks to an expert to save time and avoid damaging and expensive mistakes. Most professional community management companies offer financial services and can assist with:

• Fee collection
• Monthly reporting
• Accounts payable and receivable
• Budgeting
• Statement preparation
• Contract negotiation
• And more

At the very least, consider partnering with a Certified Public Accountant (CPA) who has experience with HOAs to confirm accuracy and help with tax preparation and audits.

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4. Maintain your reserve fund.  

All HOAs should have money set aside in a reserve fund to guarantee the community is prepared for expected and unexpected future financial obligations. Different from operating funds that cover day-to-day costs, a reserve fund is a special savings account used to pay for large-scale projects, significant expenses, and major repairs that don’t occur on a regular basis, including:

• Major landscaping projects
• Major renovations and construction
• Roof and fencing repairs and replacements
• Pool and playground equipment and repairs
• Shared area and structure painting
• Road and sidewalk repairs and resurfacing
• Disaster response and recovery

While the goal is to have fully funded reserves, it’s ideal to keep reserves funded at least at 70%. If you have anything below that, you can expose your community to a harmful financial burden, distrust, and frustration. Plus, adequately funded reserves are required by law in some areas.

Every HOA is unique, so to determine how much money your community needs in a reserve fund, you’ll need to perform a reserve study. During a reserve study, a professional evaluates the association’s assets, budget, and revenue and uses that information to develop a long-term funding plan for reserves.

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5. Leverage HOA accounting software.

Technology has positively influenced almost every area of our lives, and the HOA industry is no exception. To streamline management, many HOAs leverage digital tools and technology platforms. Employing dedicated software can help simplify financial tasks, boost productivity, eliminate errors, and provide a clear and accurate record of dues, payments, and expenses. For example, with TownSq, the leading HOA management software, users can easily:

• Organize financial documents
• Pay dues online
• Send payment reminders
• Track budgets
• Run financial reports
• Process delinquencies
• Maintain checking, savings, money market, and other accounts

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Seamlessly Maintain Your HOA’s Financial Stability with TownSq

HOA residents expect board members to make smart decisions and effectively maintain the financial health of their community. While collecting dues, auditing vendor contracts, partnering with financial professionals, and maintaining reserves are key to financial stability, leveraging dedicated software can perhaps make the biggest impact.

TownSq is the top technology choice for community management companies, community managers, board members, and HOA residents across North America. To experience TownSq’s wide-ranging financial features and comprehensive accounting functions firsthand, get a 30-day free trial here!  

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