Accounting is one of the most important things that management companies rely on, day in and day out. It’s an important aspect of running your association and can be a tiring task.
HOA’s an COA’s may allocate a specific board member to tackle all the accounting for their association. Normally, these representatives are pretty savvy in the number department, but it’s important to brush up on the basics. Below are some functions of accounting and the role they play within your community
Budgets:
– The written guideline for how much money your association can spend on resources and functions.
– Every association should have a budget, larger or more complex associations will need more detailed budgets.
Cost Allocation Analysis:
– Cost allocation analysis is a management accounting function used to determine how an association allocates specific costs to its goods or services. Costs commonly allocated include materials, and employee labor.
– It’s important for associations to determine these costs to reduce the amount of fees and unexpected bills in the future.
Financial Statements:
– These statements consist of your income statement, your balance sheet, and the statement of cash flows. These three statements collectively help run your association.
Forecasting:
– Forecasting is a detailed and sometimes complex accounting tool used to determine potential sales in the current economic market.
– Forecasting can also review sales history, target market or demographic information.
“What accounting method should HOAs utilize?/strong>
Generally, the accrual basis of accounting is recommended for homeowner’s associations. With this method, all revenue and expenses are reflected in the HOA’s Income Statement and amounts are comparable to the budget.
When thinking about staying organized and efficient in regard to accounting, having a software system in place is going to be the most reliable. Having these system increases organization, accuracy, and productivity of your management teams. It’s also recommend that you seek professional advice from a certified consultant that with any major question regarding the financial state of your association.