An asset section of the Balance Sheet titled Assessments Receivable appears. As the association receives payments, the cash balance increases while Assessments Receivable decreases or Prepaid Assessments increases. Therefore, it’s the only one you can use for official recording and reporting. This is also the basis of accounting that homeowner’s associations use. The Accounts Payable report shows you all of the association’s unpaid expenses.

• Because the income statement breaks down spending by budget group and by the current period and year to date, the board can pinpoint when and where any overspending is taking place.
• This means the association reports them as it pays for them, not when it incurs them.
• Community Financials offers our clients a simple and inexpensive way to avoid paying attorneys for delinquent fees and their costs which they may or may not recover for the association.
• Similarly, you only report expenses once money actually leaves the association.
• In the same way, the association reports expenses when it incurs them.

This job can be complicated by inaccurate or incomplete financial reports. Poor reporting can make an already immense obligation harder to manage. Therefore, it’s important for all board members to know how to understand and analyze financial reports. This way, hoa accounting they can prepare the association for maintenance, repairs, homeowner bankruptcy, and even financial dishonesty. Whether your HOA’s governing documents require it or not, it is often recommend that associations with a large cash flow get an annual audit.

Property Management

For instance, after you record a Member’s fee due, or invoice them for an infraction, they often pay these dues and fines late. One particular method of accounting will allow you to keep late payments in the same accounting period as they accrued, thus this is the normal accounting basis used by HOA and community associations. Conversely, using the accrual method, revenue is recorded when it is earned, and expenses are recorded when they are incurred. Instead of showing how much money is going into and coming out of a business’s bank accounts, this method provides a picture of how much of the business’s available funds can be and are being spent each month. Accrual basis accounting helps a business figure out and stick to its monthly budget. When an association uses the cash accounting method, it is especially important to consider the long-term.

Weigh the pros and cons carefully, along with the costs, to determine whether it’s right for you. The amenities offered by an HOA community can greatly enhance your quality of life. But remember, the more amenities, the higher your fees are likely to be. To fully understand what you’re paying for, find out exactly what’s included. For example, does the money cover trash pickup and landscaping of shared areas? It’s also good to ask about whether the HOA has any new amenities in the works that may impact the amount you pay.

Is it worth it to be in an HOA?

The HOA acronym stands for “homeowners association” – an organization that is responsible for creating rules and maintaining order in the community it represents. Because the annual operating budget must be prepared using the accrual basis, the Income Statement should follow on the same basis. The Income Statement compares actual expenses and revenues reported for the period with estimated expenses and revenues reflected in the budget. While it’s not mandatory to seek help from an accounting firm, it may be required to have an independent third-party audit or review the association’s books once a year.

It provides a comprehensive view of the association’s assets, liabilities, and equity. Remember, a balance sheet must always stay balanced with total assets equating to total liabilities plus equity. HOA accounts receivable is money due to the community association, usually owed by homeowners in fees and assessments. As Colorado’s leading community management company, our team is well-versed in all aspects of HOA accounting. Furthermore, our services are tailored to meet the unique needs of each association, ensuring financial clarity, transparency, and compliance. Professional HOA accounting services bring a wealth of expertise in financial management and compliance.

Auditing Your HOA’s Financials

There could also be state laws that mean homeowners associations will be dissolved if they are not renewed. Anyone purchasing a home from the developer directly or later on must agree to the homeowners association’s governing documents. Remember; dealing with a bankruptcy is a very delicate process, and one that should not be taken lightly. If you’re unsure how to proceed or simply don’t want to invite possible legal action against your association, speak to an HOA lawyer or contact your HOA management company today. On one hand, you get the benefit of a well-maintained neighborhood that might have more amenities than a community without an HOA. On the flip side, you’ll have the added monthly expenses, and you might not get as much leeway to maintain your home as you’d like.