When it comes to the financial management side of things in an homeowners association there may be varying degrees of comfort in how things are processed. Some people within an association may have a good understanding of how to handle finances while others may be completely new to it. Either way, there needs to be a set outlook on how to take care of everything from tracking budgets to handling day-to-day accounting.
If not handled well enough some HOAs can fall prey to internal crime issues related to finances. Embezzlement cases aren’t rare in the HOA community as inexperienced members’ naivety in money management may be taken advantage of. It’s a critical part of each HOA to be consistent in tracking financial data. Understanding what should be tracked and how is an important component of operating an HOA. Here are some tips for better financial management.
It’s always a good rule of thumb to take care of an annual audit within an HOA. This is a helpful action that is helpful if an association has a large cash flow with a lot of moving parts included. There are different audits for the varying sizes and scopes of HOAs to make sure that everything is accurately assessed and processed.
This is handled through a third party such as a certified public accountant (CPA). An audit is an all-inclusive measure to understand the scope of an HOA in its entirety and targets verification and substantiation procedures as well as any relationships with debtors.
There are two popular methods when it comes to accounting in HOAs: cash or accrual accounting. When it comes to cash, income and expenses are recorded as they’re received and paid. In an accrual method, expenses are recorded as they’re incurred. This can take place even if the HOA hasn’t yet made payments, and income is recorded as it’s earned. HOAs should decide which method best suits their situation.
Bank Account Security
It’s important to keep an eye on the bank account of an HOA. Members should know what’s coming in and out, financially speaking, and understanding who has authority to make big purchases and for what. This can also help keep things like embezzlement, as noted above, at bay. If there are issues related to financial crimes, whether they are internal or external in nature, such as data breaches from hackers, HOAs can utilize comprehensive crime insurance coverage to make sure they are financially supported. Crime insurance coverage for HOA’s provides peace of mind and the right amount of financial safeguarding when something like theft of information or finances occurs.
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 (877) 807-8708 to speak with one of our representatives.