It’s that time of year. If you haven’t already finished your 2013 budget, you are probably on the final drafts before your annual association meeting. Just like last year, times are tough for your neighbors as everyone tries to get by in this stagnant economy. These problems impact your Community Association or HOA by reducing revenue collections and placing more pressure on the Board to make every dollar go further.
2013 Community Association Planning
The good news is that inflation is still low, so the base expense of operating your association should be essentially the same. Unfortunately, some costs continue to increase, and you still need to plan for maintaining a neighborhood or complex that is now one year older. Here are 5 things you can do to make your budget dollars go farther and ensure that you collect the revenue required to successfully operate your association in 2013.
- Review Your Insurance Policies. Find a reputable local agent or national firm with specific experience covering Community Associations. Regardless of your current policy and limits, ask them to recommend the optimal levels of coverage. Then run what-if scenarios to look for opportunities to save without compromising coverage levels. I’ve seen savings well over 25% from this activity alone.
- Re-bid Contracts. Like your association, your vendors have been forced to find ways to cut their operating costs while still providing the same level of service. In order to take advantage of that improved efficiency, you may have to force the question through rebidding. Also, look for opportunities to limit preventative maintenance expense to those activities that will actually save future expenditures. How much do you need to spend on HVAC “maintenance” if the vendor just changes out your filters?
- Tightly Monitor Delinquencies – Dealing with slow- or non-paying neighbors can be one of the more emotional aspects of your board position. Run your Community Association like a business. Follow your covenants as applicable, and start your collections process as soon as someone is officially late. Accept hardship requests made in advance, and require some type of ongoing payment. Everyone has to prioritize, and you can send a clear message that association dues need to be everyone’s top priority.
- Focus and Prioritize – If your budget is like my HOA budget, you probably have more than 75 line items to keep track of. Prioritize your cost cutting efforts and focus initially on the largest 10 budget items. Every cut is important, but it’s a better use of your time to creatively reduce the $100,000 pool budget by 10% rather than trimming the same 10% from your $1,000 postage budget.
- Get Professional Help – Not that kind… ask your current vendors for cost reduction ideas. They will often give you exactly what you are asking for rather than recommending changes. Take advantage of their experience. Also, think about having an accountant with community association experience review your budget and provide feedback on how similar associations are improving efficiency while cutting costs.
With a little effort and prioritization I’m confident that you can find ways to make your budget go further in 2013. Good luck with your planning process. Please let us know how we can help.
Neal Bach, CPA