Numerus HOA Services

  Understanding HOA Budgets: Basics, Tips, and Common Mistakes A well-managed budget is critical to ensuring the long term financial stability of a community. A good budget not only ensures that the HOA can meet its responsibilities, but also lays the groundwork for maintaining property values and ensuring long term expenses are properly accounted for. We'll get into the basics of an HOA budget, share tips for creating one, and outline some common mistakes that HOA boards often make when creating their budget. What Is an HOA Budget? An HOA budget is a financial plan that outlines how the association will allocate its funds over a specific period, usually a fiscal year. It covers all projected income and expenses, ensuring that the association can effectively manage the community. The budget typically includes: Income : Funds collected from members through monthly dues, special assessments, or other sources like clubhouse rentals. Operating Expenses : Ro...

Understanding your HOA's financial statements are a vital necessity for board members, and homeowners too. You don't need to be a professional accountant or bookkeeper or know the differences between debit and credit (and we're not talking about credit and debit cards), but it helps to understand what the basic financial statements look like, what they mean, and how it impacts your association. In a previous article, we wrote about balance sheets for HOAs . If you didn't read that article, you may want to take a moment to go back and read it. If you think of a balance sheet as a "snap shot" of the HOA's financial situation at a given point in time, you can think of an income statement as a summary of the financial activity for the reported period. HOA income statements are normally prepared on a monthly basis, but you may see them prepared for a quarter, or even an entire fiscal year. An income statement goes by different names. In corporate finance, it...

  What is a balance sheet and why is important for my HOA to provide one? A balance sheet is a financial statement that provides a snapshot of what an organization owns, and also what it owes to other entities. Where an income statement shows a summary of financial activity over time, a balance sheet is a snapshot at a particular point in time. It is one of the most important documents for managers and board members of a Homeowners Association (HOA) to understand because it provides a snapshot of the association’s financial health. What is a Balance Sheet? A balance sheet is divided into two parts that, based on the following equation, must equal each other or balance each other out: Assets = Liabilities + Equity Assets : These are what the HOA owns—such as bank accounts, investments, buildings, and equipment. Liabilities : These are what the HOA owes to others—like loans, unpaid bills, etc. Equity : Also known as net assets, equity represents the owne...

Cash Basis vs. Accrual Basis Accounting for Homeowner Associations When it comes to accounting for homeowner associations (HOAs), two primary methods are used: cash basis and accrual basis. Understanding the differences between these two can help HOA board members and residents make informed decisions about their community’s financial management. Cash Basis Accounting Cash basis accounting is straightforward: transactions are recorded when cash changes hands. This means income is recorded when it’s received, and expenses are noted when they are paid. Cash basis accounting is more similar to what we use with our personal finances and is commonly used by small entities and small business. Pros: Simple to Understand : It’s easy to track money as it comes in and goes out, making it less confusing for those without an accounting background. Clear Cash Flow : It provides a clear picture of how much cash the HOA has on hand at any given time. Cons: Not Reflective of True Financial Position : ...

Homeowner Associations (HOAs) are tasked with managing the finances of their communities effectively. As a nonprofit corporation, most states require laws that require the corporation, in this case, the HOA, is required to keep financial records that are subject to the inspection of the members. Unfortunately, many board members that volunteer for the position do not have experience reading financial statements. Because one of the essential aspects of the board’s responsibility is maintaining accurate financial records and producing comprehensible financial statements, it’s important to understand these concepts. Understanding HOA financial statements is crucial for board members, residents, and anyone involved in the management of the community. Luckily, the basics aren’t as difficult as one might think. In this guide, we'll delve into the key components of HOA financial statements and shed light on some essential concepts that will help your board.   Balance Sheet: The ...