Across Minnesota and the country, HOAs are experiencing financial problems that are ending in a wide range of consequences. The growing number of homeowners associations does not have sufficient funds or reserves to maintain the housing developments adequately that they are responsible for.
Some common causes of insufficient funds include:
● Homeowners unable to pay their assessments
● Inadequate planning
● Lack of structure in leadership
● Poor communication
● A decline in home values
● Adequately maintained common areas
In nearly all cases of insufficient funding, the common factor was poor budget preparation.
RowCal has become an invaluable resource for HOAs looking to partner with a property management company. We work with self-management companies to create financial accountability through our consulting services.
Below we outline seven essential steps in HOA budget preparation. If you have any further questions about your budget or would like to schedule a consultation, then contact us at 651-233-1307.
The Importance of Accurate Budget Preparation
Here are the seven most essential steps HOAs need to take to prepare realistic budgets:
1. Develop a Business Plan
The business plan you develop should include annual goals broken down into smaller monthly goals. Breaking down the goals allows you to see what funds you should allocate for each month and where the funds are going.
You should review your business plan by mid-year so that everyone on your HOA board (or the entire organization) can approve in time for the next year. RowCal accountants can also review the business plan and make recommendations.
2. Send Out Requests for Proposals (RFPs)
Vendors and contractors could be eating into your budget by offering services at set prices with no competitive bids. From this point forward you should gather bids for jobs. You can submit proposals for all types of contractor home-improvement work.
RowCal can help you manage all vendors and gather bids from contractors. We can ensure that contractors are not taking advantage of your organization. We can report the bids and offers back to you to help you make a decision.
3. Ongoing Maintenance Costs
The most effective way to assess your expenses over the next twelve months is to analyze the costs over the previous years. You may want to anticipate increased utility costs or new repairs that your HOA is likely to incur. If possible, hire an inspector to evaluate the condition of your property both inside and out.
4. Analyze the Reserve Fund
Your reserve fund is an essential component in establishing your budget. The reserve fund gives you an indication of how much money you need in your budget and how much you will need to save down the road for future costs.
Regularly updating your reserve fund analysis ensures that members of the community are contributing enough to cover both expected and anticipated fund expenditures for things like paving, roofs, and playground equipment.
5. Calculate Your Budget
After you’ve gathered all of your HOAs projected income and outgoing expenses, it’s now time to calculate the bottom line. How much money do you have? How much money do you need? How much money do you need to set aside?
As you are completing your budget, take careful notes and document everything. RowCal can help you assemble all of your information in an Excel spreadsheet and save it online so that you have instant access to it at all times.
6. Share the Budget With HOA Members
Now it is the time to share your budget with the community. One Of the best ways to do this is to distribute the budget, give all the members time to consider all items and provide feedback, and then hold a meeting. Allow everyone to voice his or her opinions, gather the input, and then fine-tune your budget as needed.
Property Management Company
RowCal offers property management consulting services for HOAs and property owners in the Minneapolis, Minnesota area. If you are looking for a professional accounting and management company to help you with your HOA, then reach out to us. We are here to help you with your budgeting needs.
If you would like to know more about the products and services we provide, call us at 651-233-1307. You can also message us on our contact page.