6 Steps for Improving Financial Reporting in HOAs

Financial reporting and management are critical components of the financial stability of a homeowners association (HOA). Its clients depend on the HOA to help them keep the association in good financial standing. This includes everything from daily operations like collecting fees and paying bills on the HOA’s behalf to annual audits and budgeting sessions.

Every HOA is different and may have unique needs for financial reporting and management. As with anything related to the HOA’s finances, it’s always crucial to consult board members before enacting any changes in the association’s best practices. However, they can use helpful tips to have better financial reporting and management methods. By implementing these steps, the HOA client can help ensure they have better reporting.

Here are six tips on how to improve financial reporting in an HOA.

Know the Accounting Method

It helps to be more familiar with the different accounting methods used to boost HOA Financial health. Whether it’s cash or accrual, an HOA should know which is best for its financial reporting duties. With a cash accounting method, they record income as they receive it and expenses as they pay for them. With an accrual method, they record expenses when they incur them—even if they haven’t made the payments yet—and they record income when they’ve earned it, even if they haven’t received the money yet.

Understand State Laws

Next, an HOA client must know its state law. They should study the laws in their state that affect HOA finances as association regulations can vary dramatically from state to state. Some states require minimal regulations, while others impose heavy restrictions. These restrictions may include limitations for HOA fees, auditing protocols, or other components of financial management.

Use Old Records and Reports

It can be helpful to use older records and reports when it comes to research. If the HOA is in good financial standing, it’s better if reports remain consistent to maintain the same level of success and HOA Financial health. However, if the HOA is experiencing financial troubles, it may be better to switch to a new model of reporting. By using old reports or other relevant financial documents, they can help determine why the HOA’s finances are in trouble.

Monitor Financial Transactions

Monitoring financial transactions in real-time help HOA’s prevent fraud or financial misuse within its board. Using automatic bank reconciliation in HOA accounting software can sync separate bank accounts to a financial management dashboard. From there, the HOA client can watch transactions occur in real-time. If something looks off, it can be flagged and researched.

Store Financial Data in the Cloud

Storing financial data in the cloud helps the HOA locate its information more easily. This helps keep data safe yet accessible to the right people and allows the HOA members to access data and manage the HOA’s accounts from any computer or Internet-connected device.

Make Monthly Reports

HOA’s should have a 12-month spreadsheet to show what expenses and income are in any given month compared to the previous month and year. This shows the HOA when something’s off or potentially suspicious. Amounts could be off because an expense is seasonal, or it could be that some bills haven’t been paid yet. When an association’s budget is reviewed every month, some discrepancies can jump out, helping to limit further issues by being proactive.

About Kevin Davis Insurance Services

For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (855)-790-7393 to speak with one of our representatives.