As we enter the year’s final months, most people are thinking about heaps of food for Thanksgiving, holiday gift giving, or their New Year’s resolution. But, those responsible for HOA bookkeeping have something else in mind: tax time.
End-of-the-year tasks required to close the books haunt HOA bookkeepers before the first Halloween decorations go up.
Responsibilities of an HOA Bookkeeper
HOAs exist to protect the property values of their communities. Bookkeeping is a critical part of running an HOA. Maintaining the financial health of an association is of utmost importance to members, and it should also be for HOA management.
Members of an HOA agree to pay dues, with the belief that these dues will fund services and amenities offered by the association, such as:
- maintenance for sidewalks, streets, and other common buildings and areas
- street lighting
- insurance and taxes
Depending on the HOA, dues might fund additional amenities such as swimming pools, tennis courts, playgrounds, golf courses, marinas, and more. HOA members have high expectations of HOA management.
Any mismanagement of money could lead to a reduction in property value and a potential angry mob of association members. Association boards must develop realistic budgets, funding all services and setting aside some money for a reserve fund to pay for large projects and replacements. Ensuring that dues are set to the right amount and paid consistently maintains the standard of living for everybody in the community. Plans should be in place to track down unpaid dues from association members.
HOA bookkeeping is time consuming and complicated every season, but additional work is required at the end of the year. To prepare, HOA bookkeepers must complete the following tasks:
- Send out required annual disclosures.
- Update reserve studies.
- Finalize the budget for the following year.
- Ensure that the homeowner list is up-to-date.
- Deliver 1099s to all contractors and vendors.
- File federal and state tax forms.
The budget must also be created for the following year. To do this, HOAs might:
- Complete a balance sheet analysis for financial awareness.
- Review vendor contracts and send requests for proposals to new vendors to ensure the best value for services.
- Determine whether monthly dues should be increased, and if so, by how much.
- Search for debts and create a plan to receive payments.
On top of the business of the holiday season, these year-end tasks can quickly overwhelm even the most savvy professionals. Self-managed HOAs, who rely solely on volunteers, face some unique challenges.
HOA Bookkeeping as a Self-Managed HOA
Self-managed HOAs rely solely on association members to handle all daily, weekly, monthly, and annual tasks required to run a community. Homeowners who volunteer to serve on the association board and manage the HOA are ethically and legally obligated to abide by the association’s governing documents and protect the association’s financial health.
There are many pros to being a self-managed HOA:
- cost savings
- management’s genuine concern for the community
But, with pros come cons, and self-managed HOAs are no different. It takes significant time, effort, expertise, and experience to comply with federal and state laws, track payments and other financials, run meetings, host events, and maintain beautiful properties.
These ongoing duties already bog down board volunteers, and by the time the end of the year rolls around, they may be overwhelmed by closing the books. Volunteers likely have other full-time jobs and families and may or may not have a financial background. These conditions can quickly lead to sloppy management, board volunteers feeling overwhelmed and burnt out, and high turnover.
Luckily, professional help is available without sacrificing your independence or breaking the bank.
Solutions for Self-Managed HOAs
HOAs can maintain all the independence, transparency, and concern for the community that comes with being self managed while enlisting professional help. Bookkeeping services are available specifically for self-managed HOAs and might be more affordable than you’d think.
Outsourcing your HOA bookkeeping might be the solution you’re seeking with:
- diligently maintained financials
- expertise in bookkeeping practices and tax forms unique to HOAs
- more support for hardworking volunteers
- no loss in knowledge as board members leave
Choosing a Bookkeeper
Hiring an external bookkeeper comes with pros and cons. But, if you’ve evaluated your association’s unique situation and determined that hiring an out-of-house bookkeeper is the right choice for you, it means it’s time to find an exemplary bookkeeping service or person.
You wouldn’t give control of your personal finances to someone you didn’t trust, and it’s no different with your HOA. Taking the time to find a bookkeeper you can rely on is a crucial part of the process of outsourcing your HOA bookkeeping.
When looking for the right bookkeeper, you want a person or company who:
- has a strong knowledge of financial best practices for HOAs
- understands federal and state laws pertaining to HOAs
- is transparent with processes and fees
- answers the phone and is easy to communicate with
- receives excellent reviews from a variety of clients
- takes security seriously and protects your association’s financial data
Hiring a bookkeeper doesn’t have to be an overwhelming decision. Consider forming a special search committee to put together a list of your priorities, complete research, tap into connections to seek recommendations, request pricing and compare, and interview potential bookkeepers before making a decision. Just like a relationship, hiring a bookkeeper isn’t something you want to rush into.
PayHOA’s Bookkeeping Service
PayHOA’s mission is to make life easier for HOA managers and homeowners. Our software has helped over 10,000 HOAs manage nearly 500,000 units for the last half a decade, with over 400 HOAs joining in just last month.
The all-in-one software has accounting, communications, payments, documents, violations, and owner portals in one central place for both homeowners and managers. This unique portal allows HOA management to do their job more efficiently and removes barriers for homeowners to pay dues and communicate with management and other homeowners.
At PayHOA, we strive for constant improvement, and that is why we have expanded our offerings to include our bookkeeping service. Our HOA bookkeeping service can make the end of the year more relaxing for you, but that’s not all.
Our bookkeeping team will provide monthly reports to help you stay updated on the association’s financial health and become aware of any problems immediately. We compare bank statements to your financial records and gauge your progress toward your overall goals.
At the end of the year, our bookkeepers work with you to create a budget. We bring over 50 years of combined experience to your finances and help make a budget specific to your HOA’s size, goals, and plans.
For an additional cost, we can prepare 1099s for your vendors and contractors, process paper checks, and prepare 1120H for the IRS.
We pride ourselves on our commitment to our customers. Our support staff is located in the United States and is always an email or a call away. Give us a call today to learn if PayHOA is the solution for your financial stress and tax time blues.