Preparing a Budget
Budgeting is one of the most important functions of an HOA’s board of directors, and one of the most common stress points between association members. Without a strategic budget, cash can vaporize quickly, and no one wants to spring a special assessment on their neighbors mid-year. With a well-planned budget, you can instead build a path to maximizing the impact of your funds. Here are some essential tips for establishing an HOA budget that takes necessary and unexpected expenses for the year into account.
Know What Drains Your Budget
Awareness is key when building an effective budget, whether it’s for your HOA, or your personal pocketbook. While it’s important to know how much money your HOA can reliably bring in from assessments and other resources, certain funds going out too quickly can sink even a strong ship. Knowing what expenses typically are heavy hitters to your HOA’s budget can help you prepare to allocate more resources to them in the coming year. Whether it’s essential maintenance tasks for residents or community beautification that leads your budget astray, this knowledge is essential to anticipating true costs.
Use Technology to Your Advantage
Using proper accounting standards and organization software can help you maintain your budget throughout the year. Not only can you keep a history of past expenses in the software, you can quickly see what goes in and out each month. Ideally, your accounting and budget software should integrate well with other electronic systems, such as resident billing and payment, for easy data tracking and analysis. At Brown Community Management, we use online portals and tools to help monitor fees, as well as advanced tools for board members to monitor expense reports and budgeting.
Identify Different Types of Expenses
Each HOA has its own unique set of expenses, but they can generally be broken down into fixed and dynamic costs. The monthly payment to a parking monitoring company, for example, is a fixed cost, whereas dynamic costs might include emergency maintenance after a particularly brutal monsoon season. Using historical data as a basis for budgeting can be extremely useful as a baseline, but be wary of relying on it, as no two years are the same.
Proactively Monitor Maintenance Schedules
Although some maintenance tasks–such as landscaping and roadwork–come up every year, other big-ticket items are less steady. For example, re-painting curbs, or replacing equipment in the fitness center, may become necessary irregularly and unexpectedly. That being said, you can do a better job at expecting the unexpected when you carefully monitor your assets and their maintenance schedules. Pool pumps, irrigation systems, and HVAC systems for community centers all have recommended maintenance schedules. Proactively scheduling maintenance will prevent more costly repairs and help you plan ahead for replacements.
Build up an Adequate Reserve Fund
An emergency fund is crucial to any business when times get tough. Making sure that your community has an adequate reserve fund to cover large, planned projects and emergency ones as well will be another tool in your community’s tool belt to ensure that your association can weather any storm. If you’re not keen on raising fees, find creative ways to reduce and manage costs.
Brown Community Management can help your HOA with annual budget preparation. Helping you navigate finances so that you can better serve your residential community is why we do what we do. To get started, contact us today.[Sassy_Social_Share url="https://brownmanagement.com/preparing-a-budget/"]