Basic Accounting Concepts That Board Members Should Know

As a board member, it is imperative to know some basic accounting concepts to keep the homeowners association operating without any financial surprises.  From year to year, expenses can change so always know the components that your association is responsible for and calculate those changes into the budget for the following year.

 

Like the homeowners association website, areas of the community need to be updated periodically to maintain property values.  What accounting concepts will prove to be valuable in the future for HOA board members?

 

 

A great way to assess the homeowners association budget for the future is to look at the expenses in previous years.  Expenses for the upcoming year can be more accurately estimated in the accounting process by gathering what was actually spent in the past years.  As well as accounting for future changes such as trends that could cause an unexpected increase in spending.

 

Once the expenses are calculated, the amount that will be charged to residents in homeowners association fees can be determined.  If ever the HOA fees are insufficient, the result could lead to the board using reserve funds or a special assessment to cover the shortage due to under budgeting.  Are your board members aware of the impact their choices have on you?

 

 

For board members that want lower fees, remember that reserve funds should always be a part of the accounting process that provides for the future.  Additionally, they provide a safety net towards ensuring the association has the necessary funds to afford repairs and maintenance expenses.

 

If maintenance would be deferred, homeowners may lack pride and refrain from getting involved in the community.  Board members can stay on track by systematically reviewing the accounting process and advise residents of any changes through the homeowners association website.