4 Pillars of HOA Management

4 Pillars of HOA Management

HOA (Homeowners association) communities are on the rise across the nation. Around 58% of homeowners live in HOA communities and across the country, around 8,000 new HOAs are formed each year.

The prominence of HOAs and the diverse characteristics of each community pose an HOA management challenge to homeowners. Many HOAs turn to third-party companies to handle the heavy lifting of the HOA’s daily duties to the tune of tens of thousands of dollars each year. 

In 2021, an estimated 35% of HOAs were self-managed. However, tools like HOA accounting software are making these duties more approachable for volunteers—regardless of their background or experience. 

NO matter how you go about it, there are four things your HOA board needs to run smoothly, satisfy homeowners, and stay profitable. 

Pillar 1: Streamline Dues Collection

Homeowner dues are the lifeblood of your HOA, and collecting them is the most urgent function of HOA management. Dues provide the funding needed to maintain amenities, make repairs, and budget for improvements. 

Usually, the task of collecting dues falls to the HOA’s treasurer, and it isn’t as easy as it sounds. 

Some homeowners prefer to pay by check, while others pay by cash or card. Collecting and processing several different types of payments causes more work for the treasurer. Not to mention, depositing checks requires a trip to the bank, and they take a few days to process. 

While many homeowners may faithfully mail their dues in by check, unavoidably some will forget or find themselves out of town with no way to pay. In this case, the treasurer must connect with them to arrange the payment. If the treasurer has a job, or if the homeowner works odd hours, this can be difficult.  

As a result, dues payments trickle in inconsistently over the course of the month — until it’s time to do it all over again. You can see why many HOAs leave this work to third-party companies. 

But the simplest solution to this challenge is to offer digital payments to homeowners. That way, they can pay with a credit or debit card, or through a bank draft. More importantly, they can pay anytime, from anywhere, without interfacing with the treasurer at all. 

Unlike checks, digital payments hit the HOA’s bank account instantly. Some HOA accounting software platforms like PayHOA allow homeowners to enable autopay, so they don’t have to remember to pay their dues each month. This simplifies the dues process for both homeowners and the HOA treasurer, and gives the HOA’s cash flow much more stability. 

Pillar 2: Organize Your Bookkeeping

Keeping your accounting and records organized can be extremely difficult. However, with the right tools and processes, even HOA treasurers with no accounting or financial background can keep the HOA on track. 

Many HOAs keep track of their accounting with basic tools like spreadsheets or even paper ledgers. These methods create several liabilities. 

  • Though these tools are digital, they still require a ton of manual work and data entry. Not only does this make the job of treasurer more difficult, it’s more prone to human error. 
  • The treasurer must create their own system for keeping information organized. This creates too much reliance on one individual. If they decide to leave the HOA, it can be tough to make heads or tails of their records. 
  • Good bookkeeping practices don’t always provide the clarity needed for long-term planning or informed decision-making. It can still be difficult to gain a birds-eye-view of the HOA’s financial health. 
  • General accounting softwares like QuickBooks aren’t built to handle an HOA’s needs. To name just a few issues, they don’t handle mass, recurring invoices well, and they don’t distinguish between property and owner.

This is a huge area of concern in working with a third-party management company. These companies handle the HOA’s bookkeeping, but don’t always keep the HOA board informed about the finances. If the HOA decides to end its relationship with a management company, it can be difficult to regain control of the books and records. 

For HOAs who choose to self-manage, an HOA-specific accounting software can answer almost all of these concerns. 

These platforms allow you to create separate profiles for properties, owners, and vendors. They keep all your transactions in one place and automatically sync with the HOA’s bank account. Plus, these HOA platforms automatically generate reports that indicate your HOA’s financial health. 

To prioritize your HOA’s goals, the HOA must know where it stands. The end goal of organized bookkeeping is to provide the clarity your HOA needs to move forward — whether that means  building reserves, conducting an audit, planning a new amenity, paying taxes, or something else.

Pillar 3: Be Transparent With Homeowners 

Communication is a key piece of HOA management. Homeowners pay dues to maintain their HOA community, so they deserve to know how their money is being spent, what’s going on in their community, and how to participate in the HOA board’s decision making.

Accounting

Remember, homeowners chose to live in an HOA community as an investment. When homeowners know their investment is being taken care of, it makes for a good relationship with the HOA board and an overall happier community. 

From an accounting perspective, most homeowners want to know just four basic things:

  1. How much cash does the HOA have on hand?
  2. How much money does the HOA have in reserves?
  3. What is the HOA spending money on?
  4. What should the HOA be spending money on?

The ability to answer these questions comes from organized bookkeeping, but the HOA board must also take an active approach in communicating these points to homeowners. Some state HOA laws require a level of openness, but the legal standard should be the bare minimum for transparency around finances. 

Board meetings

Running an HOA is a team effort, and when you include homeowners, that work will go much smoother and will be well-received. 

  • Announce meetings a few weeks in advance.
  • Be clear about the rules for how meetings will be conducted and how homeowners can be heard. 
  • Make a meeting agenda available to homeowners before the meeting, so those in attendance can contribute helpfully to the discussion.
  • For those who can’t make the meeting, be sure to take minutes and note outcomes of the meeting and distribute them to homeowners within a few days of the meeting. 

There are numerous tools HOAs use to reach out to homeowners. Some use a newsletter or mass email, while others create a website for their HOA and post updates there. Whichever method or arrangement of methods work best for your HOA, make sure you have a plan for storing a backlog of updates and information over time.

Community rules

Issuing fines and violations is no fun—not for the HOA, and not for the homeowner. Making your community rules clear and easily accessible helps prevent violations and conflicts in the first place. 

Your rules should cover architectural requirements, parking, noise, and sanitation. Additionally, you’ll want to provide guidance around using amenities, making dues payments, and having visitors, to name a few. 

As a bonus, make sure homeowners know what maintenance duties are their responsibility and which duties will be handled by the HOA. 

The rules are important to maintaining homeowners’ property values. Most people want to follow the rules, but it’s only fair to make those rules clear and readily available to them in multiple places—for instance, within their HOA accounting platform and on the HOA’s website. 

Some HOA accounting softwares offer these many communication features within one holistic platform, and many come with a free trial period. Try out a few and see which one offers you the best set of features.

Pillar 4: Plan For the Future

With financial transparency, your HOA can start working toward long-term goals without having to increase dues or impose a special assessment fee on homeowners. When looking to the future, there are a few specific things to consider. 

Mid- and long-term maintenance

Sooner or later, your amenities will need some significant repairs, like replacing the roof on the clubhouse or having the water in the pool replaced. With enough foresight, you can gradually save for these costs so that it doesn’t affect homeowner dues or the financial progress of the HOA. 

To anticipate what these expenses will be, your HOA should conduct a reserve study. A reserve study is basically an assessment of your common areas and amenities, and it produces a maintenance schedule that will inform your HOA’s planning. 

Reserves

Reserves are the HOA’s savings. Some states require HOAs to hold a certain amount of reserve funds. Reserves help insulate the HOA from unexpected expenses and help preserve the community’s value. 

Saving for reserves and maintenance costs is no different than budgeting for a new amenity: It all starts with financial transparency and clear bookkeeping.

Software is the Key to HOA Management

HOA management traditionally requires a ton of manual legwork, imposing a huge burden on HOA volunteers who want to contribute to their community. HOA accounting software helps them excel at their duties at a fraction of the time and effort. 

With HOA software, the HOA can gain a clear picture of its finances, and it is from this clarity that everything else stems. But effective HOA management isn’t just accounting. It’s about creating a great place to live. The best HOA management software comes with all the additional features you need to create a great experience for homeowners and build stability for your community for years to come.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest

Latest Issue

4 Pillars of HOA Management
BDC June 2022 issue - 293

Related Articles