Whether you are a novice or expert in community association management or board leadership, the financial responsibilities can be intimidating. Running a business is a big financial responsibility. If you’re struggling to keep up with the financial side of association operations, you are not alone.
The good news is, with the right plan and approach, you can do this! Here is a quick look at some things you can do on each month, quarter, and year to stay on top of the financials:
Monthly – be proactive, not reactive
- Review the financials. This includes the balance sheet and income statement. The balance sheet confirms the financial position at that point in time, where the income statement shows income and expenses vs. budget.
- Document variances. Notice an unusually high water bill or unusually low landscaping expense? It’s better to document that immediately and investigate. You’ll quickly identify issues, and the explanations will make budgeting easier next year.
- Reconcile bank statements. Just like you (should) keep your checkbook balanced, the bank reconciliation lists outstanding checks and deposits, tying the bank statements to the balance sheet balances.
- Check delinquencies. As we enter tougher financial times, it’s critical to keep an eye on resident dues payments, reacting quickly to late payments. Implement a collection policy and follow it to the letter.
- Report to the board. The property manager and treasurer should assemble a brief summary report, including items like revenue, expenses, overall budget status, and major variances. Keep it simple and it will be more likely to be understood.
Quarterly – watch trends, avoid surprises
- Maintain common areas. With crazy inflation, lack of supplies, and labor shortages, don’t skimp on common area maintenance activities. Neglecting them today will only increase maintenance and repair expenses later.
- Fund the reserves. The reserve fund is the savings account for specific major repairs and replacements. Ensure that it is funded regularly and adequately, according to the reserve study.
- Spend the reserves. As mentioned above, reserve funds are already allocated to specific repair and replacement activities. Follow that prescribed schedule.
- Keep residents informed. Consider a regular, high-level financial update to let the community know how things are going. This may also help prepare everyone for how inflation and skyrocketing insurance costs will most likely impact next year’s budget.
- Change passwords. Theft, whether real or cyber, can decimate a community’s finances. Something as simple as changing critical account passwords can minimize the chances of this occurring.
Annually – think about next year and beyond
- Prepare an annual budget. It takes time to do this right, so start early. Form a committee, agree on goals, review the previous budget and variances, determine required revenue, and create a realistic budget for next year. Communicate your process to the board and community, so they understand your logic as well as the numbers.
- Review and update contracts. All major contracts, like landscaping, pool maintenance, and property management, should be written and current.
- Look for cost-saving opportunities. These days, you may be trying to minimize supplier price increases, but there may still be ways to trim costs, especially around lower-priority services and expenses.
- Engage experts to help. Have your insurance agent review your coverage. Have your lawyer review the collections policy. Have your CPA review your budget and audit the books. Have your engineering firm review your reserve study.
- File tax returns. Community associations must file federal (and state in GA) tax returns. I sound like a broken record, but you’d be surprised at how often this comes up!
Your community, your business, your fiduciary duty
We hope you see that maintaining your community’s financial health is easier if you allocate time to specific activities each month, quarter, and year. It’s your job, and for board members, also your fiduciary duty, to manage the financial aspects of this business. There’s plenty of help available, when you need it, from professionals like us with years of industry experience. Just give us a call.