Why Setting HOA Accounting Standards Is Essential
Organizing Homeowners Association’s finances can be quite stressful for community managers to navigate. The reason for this is that many different costs and expenses go through communities daily. HOAs are required to file taxes, which is why it is important to keep the community’s expenses organized from the beginning to avoid issues with taxation. When trying to figure out how to organize your community’s finances, review the information below:
How HOA Accounting Standards Are Beneficial to Communities
Accounting Standards can be a great help to communities. Many communities have decided to have an annual HOA Audit to be sure that the finances of their associations are being managed accurately. When designing your community’s Accounting Standards, be sure to integrate the following practices:
The Balance Sheet is a report that shows an HOAs financial condition. It is a comparison of the assets minus the liabilities, which will show the overall net worth of the association. Having this information is essential to show the overall financial health of the HOA and what capital is available for the required expenses of managing the association.
General Ledger possesses the accounting record for each transaction in the order that it occurred. This makes it easier to track each financial transaction that occurs in the association’s expenses.
Statement of Income & Expense
The Statement of Income & Expense is the most important management tool because it contains the precise amount spent each month compared with the amount budgeted for that month. This statement also shows the difference between the two amounts, which helps managers to see which expenses need modifying.
Accounts Payable Report
The Accounts Payable Report shows unpaid expenses and demonstrates the association of expenditure obligations that were incurred in the current month. The report also shows which members have not paid their dues.
Cash Disbursements Ledger
The Cash Disbursements Ledger informs board members of the different checks that have been written. Usually, the ledger will contain who the check was written to, the amount, check number, and date it was written.
How Elite Management Services Can Help
Elite Management Services has extensive experience with managing HOAs located in diverse parts of the United States. One of our strengths is assisting them in becoming more financially responsible through integrating our Homeowners Association Bookkeeping practices. Our services help take the burden off of communities that are having trouble managing accurate financial reports due to the many transactions that occur within their communities every month.
Having effective accounting practices can make a substantial difference in the efficiency and profitability of your HOA, which is why it is essential to organize your HOAs Accounting as soon as possible to avoid a backlog of expense reports.