HOA Accounting Services Financial Management for HOAs CSM

In this case, you would only record a revenue or expense account when you have either received (revenue) or paid (expense) money for it. Because of the timing of the cash method, account titles such as “Assessments Receivable” or “Accounts Payable” do not appear on homeowners association financial statements such as the Balance Sheet. Backed by more than three decades of experience, the staff from our organization is ready to assist your homeowners’ association today and in the future.

What If a Homeowner Goes Bankrupt?

• HOA accounting software also lets you produce detailed financial reports, keeping records that are accurate and readily available.
• Whatever that number is, a reserve fund should be between 70 and 100 percent funded, ideally.
• In some cases, members of the community might take legal action against your board for mismanagement.
• Using the Cash Basis of Accounting, you record income and expenses when money changes hands.

You can record and edit transactions directly in a module that the company describes as being comparable to QuickBooks and other small business accounting software. PayHOA® is a community association management platform with solutions focused on self-managed associations, property management companies, and general HOA bookkeeping. You can also create, monitor, and maintain budgets for each association, tracking budgets vs. actuals. You can share insights formally with easy-to-generate financial reports, and also give boards real-time access to data. With a firm grasp of what features to look out for, let’s compare some of the top HOA accounting software options on the market today.

When your association uses cash accounting, it fails to report any receivables or payables. That means you have no way of knowing about any money coming in or any expenses you expect to pay — at least, not with a simple look at your financial records. This opens you up to the possibility of operating under a misapprehension regarding your finances. The final method, modified accrual accounting, is simply a combination of the other two methods.

Secure Database

But, you have no way of determining their accuracy because you cannot cross-reference them with your Balance Sheet or General Ledger. Particularly with expenses, you should account for pending transactions so that you don’t overspend. However, it also doesn’t hurt to go the extra mile and take some time to familiarize yourself with federal, state and local tax laws, as well as to take advantage of tax-advantaged accounts.

Your income statement depicts your association’s income and expenses for the period specified (usually for the month). It lists down all your revenues as well as your expenses, deducting the latter from the former to arrive at your net income or loss. The best way to know if a particular platform is the right fit for you is to put it to the test. Give it a spin risk free to see the benefits of purpose-built accounting tools firsthand. Its tools lack some of the integrations and customization capabilities of other options on this list, so it may not be an ideal fit for larger or growth-focused HOA management companies. One key feature is access to templates and automation for tax-related documents, such as 1099 forms, which speeds up the preparation process.

What’s the Difference Between HOA Reserve Fund Accounting and an Operating Fund?

As a board member, you should know how to analyze financial reports to prepare the association for maintenance, repairs, and homeowner bankruptcy. Lay a good foundation for successful financial management by using the best HOA accounting method. This method takes a little bit from both the cash and accrual accounting methods. For money earned, an HOA would use the accrual method, recording money when it is due to hoa accounting the association and shifting it to the cash column when cash is received. When money is owed by the HOA, expenses are only recorded when the money is actually paid, like the cash accounting method. When an elected community member self prepares financial statements, make sure that there is a backup of all financial records.

Understanding the Pitfalls of Cash Accounting for HOAs

Our list includes a mix of comprehensive software for HOA management and platforms that are built for more specific tasks, so you can get a good idea of the options available and how they stack up. As we’ll see, software that focuses exclusively on HOA accounting isn’t always the superior option. Often, you’ll be able to see more benefit from accounting tools that are integrated into a broader system for managing HOAs. FreshBooks accounting software for homeowners associations has settings that allow you to customize an invoice template with your logo and other branding materials to make your invoices look professional. It is equally important to check state laws to see which accounting method you should ultimately use.

You can even charge a small fee for flexible payment options, creating an additional source of recurring revenue. Consolidating all of your favorite business apps on one platform can help  eliminate the confusion that comes with storing data and information in a million different places. 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.

Again, these tasks can be automated with the right software, tightening up operations and reducing the effort that comes with manual operations for an HOA. The accrual basis method will have a significant effect on your HOA’s financial statements. With this method, you record transactions on a monthly, weekly, and daily basis as you incur them. This results in very detailed reports that are automatically generated. For every report, the amounts recorded as a liability or asset should equal the total balance on your association’s balance sheet. You don’t want to invest in a system that doesn’t grow with you – and you don’t want to overcomplicate the process either.

Monthly Reporting

Many HOA accounting software solutions include features for maintaining digital ledgers, which can streamline the entire ledger process and avoid any data loss. Buildium® is an HOA and property management platform that is purpose-built for the industry. With a broad toolkit of features, it can streamline almost all of your community association management tasks, from day-to-day bookkeeping and operations to strategic marketing and vendor management.

This flexibility is important for timely decision-making and enhances the responsiveness of HOA management to residents’ needs and financial questions. Some HOA accounting software options feature bank integration, a powerful functionality that connects the software with the association’s bank accounts directly. This integration enables automatic bank feeds, where transaction data from the bank is imported into the accounting software in real time or at scheduled intervals. This seamless connection eliminates the need to enter transaction data manually, simplifying the workflow for HOA managers.

Integration also gives you a more complete view of the association’s operations, which can prove invaluable to understanding your finances. Software should make it easy to track and categorize every expenditure. This detailed oversight helps in budgeting and financial planning, making it easier to allocate funds efficiently in a way that supports the association’s goals. Once you decide that you’re ready to use FreshBooks as your accounting software, you can choose from one of our plans that start at just $15 a month. Luckily, FreshBooks designed exactly what you need to successfully manage your homeowners association.

In this case, it’s absolutely essential to have one centralized system for recordkeeping. Staying organized will enable your team to find and share the records they need quickly and minimize the possibility of important documents getting lost in the shuffle. Conducting an audit involves hiring a third party to review the association’s financials. Usually, the third party will be a certified public accountant (CPA) or other financial professional who will check that your records comply with basic accounting principles and verify their accuracy. The CPA will compile the financial records and use basic accounting to make sure the financials were kept correctly. They may take certain steps to correct entries before preparing the report.