Budget preparation is an essential part of every association’s finances, no matter the time frame – quarterly or annually. For homeowners associations, a well-drafted budget must be prepared as a new financial year approaches, but not all associations know how to draft an HOA budget.
An HOA budget is essential to the financial success of any community organization. Despite its value, there are so many associations that forget to prepare an HOA budget. As expected, the follow-up effect for these HOAs would be facing financial crises in the coming years ahead — this is something they could have easily dodged had they done what was needed.
Below are some HOA tips that can help you with this:
1. Gather a Task Force
While it is part of an HOA board’s responsibility to draft an HOA budget, creating a task force devoted to the project will go a long way to help. The task force does not need to include only board members. A general rule of thumb, the task force should comprise the board president, treasurer, and community manager. Other members must include finance and budget committee heads.
With a group devoted only to preparing your HOA budget, you stand to gain a higher level of success.
2. Plan a different Budget Session
One can make the mistake of trying to plan and organize a budget session on the same day an important meeting would hold. It is worth considering that a budget plan is not something to be taken lightly. It is unethical to look at budget planning as a light task that can be placed for a few minutes after a meeting no matter how important the meeting may be.
Budget planning demands its own separate and important session, in fact, Budget planning is a proud task. If it needs a week, give it a week. When you go into a budget planning session after a meeting, you risk a lot. You will be tired and there would be a lack of focus, all this could lead to poor planning.
Ensure to dedicate an entire day or days for the HOA budget planning as it demands you give it all your best. When you have much time, you can always go over factors that can affect your finance and you will be able to make the best decisions. It is also crucial that all participating parties be present at the session.
It is advisable that you go into the budget planning meeting, actually any meeting, with a clear head and open mind. If you need to take breaks then do so, you want to be comfortable and clear-minded to make the right decisions. This should be taken very seriously for the mere fact that money is involved.
3. Create crystal clear objectives
Once the budget planning session begins, it is crucial that you and your team start with drafting the association’s goals for the next few years. It could be something as straightforward as what the association hopes to gain in the next 3 years?
When outlining these goals, it helps that you take note of everyone’s ideas. People have nice ideas and one common trait of a good leader is to encourage people to voice up and take note of these ideas.
If it is up to you, reach out to different homeowners and take a survey. Find out what changes they would like to see and what they would prefer to remain unchanged. Determining a crystal-clear objective will help you visualize what everyone would like the community to look like. Once you have those clear goals, you can then go on to plan your budget appropriately for the year ahead.
4. Establish your current Financial condition
The next move would be to determine and access your current financial situation. It helps to check through your records and analyze them well. Take records of areas where you may have spent more. Correct these allocations in the new budget with a simple understanding of where the money should go and how to prevent excessive fees.
5. Prioritize Your Repair and Replacement Projects
Repairs and replacements are a crucial part of any HOA budget. A well-preserved community is not just appealing to the eyes but also aids to increase property values. If maintenance is dropped, the community loses a lot.
6. Expect changes out of your control
No matter how well your plan might be, it is certain that things will not always go according to plan. When you plan for unexpected changes, you are more prepared to handle them. The same can happen when drafting an HOA budget.
At times, it could be forced out of your control. It is important that you prepare for setbacks in the case that they might happen. Some of your plans to counter unexpected setbacks would be to have an alternative. An example; if utility rates are on the rise every year, you can contact a local agency and they can give you a fixed rate.
7. Carefully plan your HOA Reserves
The reserve fund is as important as when you prepare the HOA budget. A part of the dues should be set aside for the reserve fund each year to plan for future repairs.
8. Create your HOA Budget
Once all the necessary factors have been evaluated, you can go ahead to create your HOA budget. A rule of thumb is when you happen to be in doubt over any figure, it is better to overestimate the prices than to underestimate them.
No HOA is excluded from budget planning. If you want to prepare an accurate HOA budget, you should do it with a pro team and consider all likely factors.
Certainly, budget planning is crucial to an HOA’s success, but it does not end there. You need to ensure that you keep to the budget.
An HOA management company can save you the trouble of stress of going through such rigorous activities. At core accounting, we take the weight off you and handle the difficult part so you don’t have to.