Jesse Hitt • 03 May 2024 • 6 min read

 Navigating Financial Transparency with HOA Software 

In a world of instant information, your HOA members expect to have their questions answered in real time, and with the right HOA software, you can. 

Self Managed HOA Software

For most self-managed HOAs, financial transparency isn’t an issue of keeping secrets but instead of technical capability and personal bandwidth. Who has the time and technology to compile, sort, and present that data in a way your residents, your board, and the IRS can understand? 

Now, with the Corporate Transparency Act (CTA), HOAs must submit Beneficial Ownership Information (BOI) reports on top of all the other compliance and financial documentation. 

Luckily, self-managed boards now have access to HOA software that gives them the power to manage their HOA’s finances confidently and transparently—all without engaging expensive outside help. Capterra even made a helpful list of all the best HOA software options.

HOA software

Why is financial transparency important in HOA management?

Maintaining transparent financial records is a part of good, compliant governance, but clean books come with several other benefits, including:

  • Confidence in dues management
  • Improved ability to plan and project
  • Better financial reporting
  • Increased cash flow visibility
  • Easier to file legal and tax documents
  • Increased trust in the HOA

Here are six ways better HOA accounting software can benefit a self-managed association.

1. Good stewardship and best practices

HOA board members lead a legal organization that manages money and reports to government bodies. Regardless of goals, intentions, or budget size, the HOA board members are the ones left holding the bag. They’re legally responsible for the correct management of funds.

With an HOA accounting software built specifically for handling financial compliance, best practices are no longer enviable; they’re achievable. 

2. Informed decision making

When your board makes a decision, is it based on financial data or gut feeling? Don’t get us wrong, both are important, but the quality of decisions made often reflects the quality of data used. 

Consider how better data tracking, visualizing, and projecting capabilities could benefit your HOA. With a better understanding of the future, you can schedule maintenance, plan for neighborhood improvements, and maybe even plan far enough ahead to reduce your member dues. 

3. Fairness and equity

Transparent finances give everyone visibility into budgeting, which makes it easier to find inconsistencies in spending and more equitable use of funds.

With simple reporting, HOA board members tasked with organizing financial data will be able to share accurate, up-to-the-minute information with more stakeholders more easily. Making the information easy to share and interact with increases engagement from board members and neighbors.

HOA software

4. To prevent mismanagement and fraud

Part of promoting transparent financial practices is the prevention of fraud and mismanagement of funds. 

Having all the financial data updated in one location provides board-wide visibility, and with that comes more accountability. Checks and balances help deter fraud and mismanagement before the opportunity ever happens.

Finding HOA-specific accounting software will help you organize your finances, give increased visibility into the data, and monitor contracts and payments from one dashboard. 

5. Legal compliance

Whether you’re filing a BOI report, Form 990, Form 1120, Form 1120-H, or one of the many documents HOA board members are required to keep track of, you have to keep a lot of important information updated and accessible at all times. 

That’s hard to do in spreadsheets or even using more advanced software like QuickBooks. Most HOAs have reporting requirements and document storage needs that transcend the more generalized options, which is why HOA accounting software can be beneficial and even cost-saving to associations like yours.

The right HOA accounting software can even take care of some of your filing documents for you.

HOA software

6. Resident trust

At the end of the day, residents want to feel like their HOA dues contribute to a thriving community and that they can trust their HOA board to make the right decisions. 

An HOA board that leads with transparent and accurate financial data is taking the first step toward an open, good-faith relationship with its neighbors. 

What’s changing for self-managed HOAs when it comes to financial transparency?

One of the biggest challenges of HOAs in 2024 is addressing the changing demographics of their communities. The two youngest generations of homeowners are buying an increasing majority of homes each year, and bringing with them new expectations. 

Young homeowners expect transparency.

Study after study finds millennials value high ethical standards, authenticity, and transparency over everything else — this is true of brands, bosses, non-profit organizations, celebrities, and social media influences. 

It’s also true that one of the biggest regrets first-time millennial homebuyers reported was being surprised by unexpected costs and fees during the sale. 

More than half of those surveyed reported regrets about the home-buying process, the majority of which were about expenses that weren’t transparent at the beginning of the process. 

The younger generations of homebuyers, including GenZ, expect to have instant access to the most updated information, and they prefer to access it from their mobile devices (that’s right, millennials aren’t the only young people ruining the housing market these days). 

Switching from spreadsheets or basic accounting software not only gives your HOA the opportunity to better manage finances but also more easily share the appropriate information with the appropriate people. 

The Corporate Transparency Act complicates things.

As mentioned above, as of January 1, 2024, the CTA requires that all reporting entities file a BOI report with the Financial Crimes Enforcement Network (FinCEN). In most cases, this requirement includes HOAs, even those with preferred tax status under Internal Revenue Code § 528.

While the report itself isn’t too complicated, and the filing isn’t as scary as FinCEN’s involvement would imply. However, filing does require the collection and storage of personal information, and the penalty for failing to submit can be up to $500 per day, up to $10,000, or two years in prison. 

How can HOA-specific software help with financial transparency in your neighborhood?

If you’ve made it this far in the article, I’d like to ask you a question: Have you experienced a problem with a lack of transparency in your HOA? 

Whether your problem stems from limited visibility, poor past management, a lack of participation, or bad-faith actors, engaging in transparent bookkeeping and financial reporting is a crucial step toward building trust and neighborhood engagement. 

Homeowners engage when you make it easy.

Homeowners aren’t lazy; they’re busy. The easier you make it for them to participate in your HOA, the more likely they are to engage. Having HOA software that makes it as easy for your neighbors to pay their dues, engage in community decision-making, and communicate with their neighborhood can do more than make financial reporting easier. It can help a neighborhood thrive. See how an HOA accounting software like PayHOA can help you better serve your community.

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