Your HOA has needs. Those needs cost money. And there is only so much money to go around.
Welcome to the wonderful world of HOA budgeting.
While the task ahead of your BOD may appear daunting, don’t stress too much and don’t put off the job. It’s a simple matter of balancing what’s coming in vs. what’s going out.
Here are the steps you can take to ensure that your HOA’s needs are met while sticking to a budget.
What do you need?
To start, you’ll need to determine what your HOA really needs. Maintenance, utilities and other operating costs should be factored in but maybe your HOA needs a new roof on the community building. Maybe you need some sewer work done or landscaping. Whatever your needs for the upcoming year, make sure the board is in full agreement over what is a need vs. what is a want for your community.
Create a plan
Your HOA’s plan should include all goals and needs for the coming year. Ideally, you should break down these goals by month so you can have the most effective timeline and financial breakdown. Make sure your plan is reviewed and approved in a timely manner so that you have the correct budget and time frame to complete everything.
Look at previous budgets
Sometimes you have to look backward to move forward. If your HOA has been keeping up with its books, you should be able to get a very good idea of what to expect from your past expenses. Taking a look at your last years’ expenditures will show you where your funds have been going, as well as any trends that are taking place. Use this information to help you predict the upcoming year, factor in inflation and add in any additional expenses and you’ll have a better ideas of what kind of numbers you’ll be looking at.
Look at financial statements
In the same vein, you want to take a look at what you’ve brought in to the HOA. Reviewing your income balance sheets will shape how you budget for the upcoming year. If you’re spending more than you’re taking in, then that negative equity needs to be addressed in the new budget.
Once you know what your HOA’s needs are, you can then reach out to vendors and contractors for proposals. It’s not enough to bank on previous statements and expenditures, you’ll want accurate proposals to build an accurate budget. Especially in the wake of COVID-19, you can’t always count on previous years expenses to stay the same.
Crunch the numbers
Once you’ve reviewed the previous years’ expenses and financial statements and have the proposals, you can plug everything into an Excel sheet or other budgeting software. This should help paint an accurate picture of what you’re bringing in vs what you will be budgeting for. With this thorough and well-researched budget plan, you can then share the budget with your community.
It’s a time consuming and tedious job but we believe in you! If you need guidance or assistance with community law as you build your budget, we’re always here to help. There are a number of statutes and guidelines to adhere to as you prepare for the next fiscal year. Let us know how we can be of assistance.