Your HOA can’t operate at maximum potential without healthy finances
Is your organization set up for success? Do you have your finances well-organized and ready for the daily challenges that face property managers?
It’s no secret that without proper cash flow, managed communities can quickly fall into disrepair. When low cash-flow means leaks in the clubhouse or unmaintained landscaping, residents can lose confidence in their property management. Monthly income and expenses can change in an instant when something goes wrong. Here are tips for creating a strong financial system that can help your community maintain positive cash flow.
Have a plan in place
If you don’t already have one, start by developing a financial system for your HOA. This includes creating a reporting and tracking system for things like your annual budget, expenses, contracts, taxes, and insurance policies.
Some communities prefer to outsource this process, and that can be useful for large communities or HOAs that are comprised of primarily volunteer board members.
Whether you choose to work with a third-party or put systems in place yourself, it is vital to be organized. Many communities run into trouble when managers take a lackadaisical approach to managing finances. Invoices start piling up, and before you know it, you’re out of cash reserves for important repairs or improvements.
Outline your top priorities
There will always be issues present in your community that require you to draw from your cash reserves. Everything from routine maintenance and community upgrades to fees associated with ensuring resident compliance and even unforeseen accidents like weather-related damage or vandalism.
The list of responsibilities is endless, and you will always have a pipeline of paid projects coming your way. Therefore, it is very important to set clear priorities for your association regarding how funds will be spent.
Without a careful analysis of your annual projected projects and priorities, you are likely to run through your cash reserves quickly. This can put you in a bind when unexpected things come up. Protect your cash flow by carefully scheduling out your payments to essential items first.
Make sure you’re adequately insured
Insurance protects your community by relieving you of the bulk of financial risk for the various liabilities you face. It is essential to carefully review your policies each year before renewals and make sure that your community is adequately insured for emergencies.
It is not uncommon for HOAs to pay for premiums for years without realizing that their coverage is not sufficient to cover a real emergency. Don’t let yourself get caught in this unfortunate position – review your policies carefully. Conversely, make sure that you aren’t overpaying for policies that don’t provide a correspondingly appropriate level of coverage.
When in doubt, you may want to have a third-party such as an attorney help your board review your policies to ensure that you are not overpaying, or assuming too much risk with inadequate coverage.
Don’t forget savings
Your primary tool for maintaining cash flow is to keep funds in reserve. You cannot predict every possible situation that will present itself to your community over the years, so it is essential to keep cash on hand so that you are prepared for every possible scenario.
Many managed communities simply don’t make it a priority to have savings for the HOA. This isn’t recommended. Keep as much as feasibly possible in general savings so that you don’t have to worry when unexpected costs arise.
Review vendor contracts
Finally, it is important to seek quality vendors that offer your community the best possible contracts. While seeking bids and assessing applicants can take time, there are tools that can make it easier.
The VendorSmart vendor directory makes it easy to source capable vendors for any new project. Vendor profiles in the directory include a detailed company description and history, contact information, and genuine reviews left by Community Managers.
Using our easy and intuitive tools, managers can seamlessly create and post a new project, which will notify all relevant vendors in the directory. With the click of a button, you can save hours of work and create a side-by-side bid comparison, which includes a professional board packet.
Vendor vetting is an important job for community managers, one that helps keep your community safe. Download our freed guide to find out why vetting vendors matters.