Numerus HOA Services

  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 : ...

This is a question we often get asked by new (and sometimes inexperienced) board members. And in most cases, the answer is almost always, "Yes." But, why? Before we get into the specifics, we need to cover a few basics. First, why does an HOA have an insurance policy in the first place? An insurance policy serves to protect the assets of the association in the event of an unforeseen circumstance. Associations are created to cover the costs for maintaining and replacing the common elements and limited common elements. Depending on the type of the association, these may include: streets, sidewalks, gates, fencing, roofing, exterior siding, window shutters, and possibly even patios or decks. This can vary greatly from one association to the next and is typically defined in the association's governing documents. Some associations also have amenities - clubhouse, pool, tennis court, basketball court, playground, or a fitness room or gym. The association must budget for the ong...

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 ...

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