4 Ways to Make Your HOA More Cost-Efficient

Managing your finances can be easy, but it is more challenging to do the same for an HOA. With a Homeowners association, you are dealing with a community, which means more expenses. In reality, it is impossible to budget for the exact amount for particular services or products because the market changes now and then. However, for an HOA to run smoothly, the manager and board members must be able to give accurate estimates to avoid falling into the red. Here are a few tips on how to effectively manage an HOA’s finances. 

  1. Review monthly expenditures and annual budgets

You want to avoid being the guy who is always asking their client to increase assessment charges. If the account is left at almost zero after the maintenance and paying utility bills, it is best to gather and review all your financial data and get to the root of the problem. How much is the cost of everything increasing every month? How about per year? Get an average sum so you can have a baseline that will help you plan better for the future. 

  1. Analyze your expenses

After getting your baseline, it’s time to get into the details. What exactly is causing the increase in expenses? Go through every detail, the water bill, security, landscaping, and other specific charges to find out. Were there any unexpected costs that you had to cover within the year? Have some service providers increased their charges? Knowing such details will enable you to make an informed decision in the future. You might decide to switch to a cheaper vendor or start using energy-efficient lighting within your community.

  1. Create a reserve fund

HOA finances are divided into operating funds and the reserve fund. The operating fund caters for all daily expenses, together with insurance fees and legal costs. The HOA reserve fund is usually set aside for more long-term projects such as maintenance and refurbishing of buildings and other upkeep needed by the community. Knowing the difference between the two will help you rethink the amount you invest in each account. 

  1. Come up with a plan

After doing steps 1-3, it’s time to strategize. You have an idea of where you are financially, and you don’t want to add stress to your clients, so you need a long-term plan to ensure the community will run efficiently henceforth. The first step is to have clear objectives and yearly goals whose success can be measured and analyzed after they are achieved. For example, If you want to install solar panels, ensure that they are of high quality, and measures are put in place to maintain the panels to ensure longevity and long-term efficiency.

Lastly, it is always best to share your financial plans with your community. Transparency in such matters helps to build trust in your management, and it can be easier to sell people on increasing assessment charges in the future if need be. Additionally, don’t be afraid to use the available tools such as cloud-based software to make your accounting and management more effortless

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