PPC’s Guide to HOA Accounting Accounting for Homeowners’ Associations

accounting for homeowners association

The HOA acronym stands for “homeowners association” – an organization that is responsible for creating rules and maintaining order in the community it represents. Timely reports also help them effectively allocate funds for projects and maintenance. So do the financial needs of the community, as it relates to its goals and its size.

Familiarize Yourself With State Laws

Advances in technology have made scalability and growth more accessible for association management companies, but you need scalable resources and structure to achieve manageable growth. In hoa accounting this way, your business will be able to efficiently and profitably handle a more extensive portfolio. An HOA management company is responsible for managing the HOA’s day-to-day operations.

Income Statement

The cash basis accounting method records expenses and income when money changes hands. An HOA can elect a treasurer to self-manage the association’s financial records, and he or she can prepare reports. In the hands of someone without accounting experience, however, even simple financial statements can contain errors. Every HOA must keep accurate financial records to allow for the preparation of useful accounting reports.

Board Budget Review

The cash account is then debited/credited appropriately as payments are received. In terms of revenues, the association records them when it earns them, not when it receives them. An asset section of the Balance Sheet titled Assessments Receivable appears. As the association receives payments, the cash balance increases while Assessments Receivable decreases or Prepaid Assessments increases. Using this method, the association records expenses when it incurs them, not when it pays them.

This frees up the board to focus on taking care of important issues in the community while maintaining costs and reducing overhead. You need a software that’s web-based so you can access it from anywhere; something completely secure from those who are not granted access. You also need a software that is easy to use, will do exactly what you need it to do and is budget-friendly. Send them an interactive invoice that allows them to pay directly on your secure site or mobile app. This way, the bill hits their inbox and the money hits your account in a matter of minutes.

accounting for homeowners association

accounting for homeowners association

This is because the recording of expenses follows the cash basis and not the accrual basis. Smaller, self-managed associations may have an elected treasurer, financial officer, or president that is responsible for compiling financial documents. In such cases, it is a good idea to use a professional accountant to ensure that HOA accounting statements are prepared correctly before releasing them to board and community members. Remember, just because someone was elected treasurer, does not necessarily mean they have accounting experience. Large homeowner’s associations have more complex budgets and will usually have a management company, such as CSM, that handles all financial data.

Account Delinquency Report

accounting for homeowners association

Time Efficient

  • With the cash basis method, amounts for Accounts Payable, Assessments Receivable, and Prepaid Assessments are not reported on your association’s balance sheet.
  • For smaller HOAs, however, you may only need basic features such as payment processing, invoicing and account balance monitoring.
  • The entries must be organized in order of account number — which is uniquely assigned to each account title (chart of accounts) — and by date.
  • As an HOA board member, it is important to have an understanding of the three methods that are used, their effects on financial reporting, and the advantages/disadvantages of each method to your HOA.
  • A CPA will compile your financial records and apply basic accounting principles to make sure your financials have been kept properly.

Community Events and Activities

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