Finally, the Modified Accrual Basis of Accounting follows the Accrual Basis for reporting revenue and the Cash Basis for reporting expenses. HOAs are subject to tax obligations, and proper accounting services ensure that these obligations are met promptly and accurately. While boards retain ultimate responsibility for records compliance, our partnership helps ensure your association meets all requirements while maintaining efficient operations and member satisfaction. For many HOA board members, the CTA initially seemed like yet another bureaucratic requirement. However, understanding its purpose – preventing financial crimes while protecting legitimate organizations – helps put these new obligations in perspective.
What Are the Unique Accounting Needs of HOAs?
This basis offers you a more complete and accurate picture of your association’s financial condition. Some associations have it in their CC&Rs or bylaws that a certain method of accounting should be used when recording and preparing financial statements. Though, since HOA accrual accounting is the best, consider amending your governing documents if it asks you to use a different method. Check with your HOA attorney to see how you can amend your governing documents.
- However, as associations grow and financial matters become more complex, a transition to accrual accounting often becomes necessary.
- You don’t need to have an awkward in-person conversation about an unpaid fee or dues–you can send a digital reminder.
- Each offers different benefits, and it’s important to understand the difference between them to make an informed decision.
- It objectively evaluates your internal accounting processes as well as the overall health of your association.
- Software designed for HOA needs helps you manage budgeting, tax time, end-of-year close, and reporting obligations effectively.
Time and Resource Savings
Further, the Balance Sheet will include Assessments Receivable, Prepaid Assessments and Accounts Payable, and totals for each will agree to their respective detailed reports. Since the annual operating budget is required to be prepared HOA Accounting on the Accrual Basis, then the Income Statement should be prepared on the same basis. Remember, the Income Statement compares the actual revenues and expenses that are reported for the period with the estimated revenues and expenses that were reflected in the budget for the same period. So do the financial needs of the community, as it relates to its goals and its size. Of course, the more frequently you prepare the statements, the more helpful they will be for the board of directors.
- You can import your data from QuickBooks or Excel with a spreadsheet.
- Under the accrual basis, all financial activities of your HOA are reported on the homeowners association’s financial statements.
- These payments cover everything from common area maintenance to unexpected repairs, ensuring a high quality of life for all residents.
- Whether you live in a condo, townhouse, or planned community, understanding HOA fees and their role in maintaining your neighborhood is essential.
- This involves assessing expenses, forecasting financial needs, and ensuring the association has the funds to cover its operations and planned projects.
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- Managing homeowners association records is one of the most critical – and often challenging – responsibilities facing HOA boards.
- However, boards should carefully consider how to balance member information rights with vendor privacy and competitive considerations.
- Most HOAs work with multiple vendors, from landscapers and maintenance crews to insurance providers.
- Train staff handling records to recognize sensitive information and follow appropriate protocols for protection.
- The same HOA accounting rules apply to recording expenses when using the Cash Basis.
- We offer the two market leading community management & accounting software used in the industry.
Furthermore, our services are tailored to meet the unique needs of each association, ensuring financial clarity, transparency, and compliance. One of the most common questions homeowners ask is, “What are HOA fees? ” These fees, officially known as homeowners association dues, are payments made by all homeowners in a homeowners association (HOA). HOA fees make sure common areas, shared amenities, and community services are kept in good shape, helping everyone enjoy a high quality of life.
Community Association Management
To help you we’ve put together this list of collections best practices for condo communities & HOAs. The line of credit can help smooth the cash flow process, and take some pressure off the Board. Additionally, there is plenty of available software that can assist self-managed communities. Some offer full-service HOA management features, while others focus on specific modules. There’s no shame in asking for help, especially when it comes to a subject as difficult and confusing as accounting.
Proper accounting ensures compliance with legal requirements, transparency for homeowners, and the financial health of the association. Cash accounting dictates that you should record all revenues and expenses as money moves. In this case, you would only record a revenue or expense account when you have either received (revenue) or paid (expense) money for it.
