It’s budget season!
Creating an annual community association or HOA budget can be one of the toughest tasks for a property manager or board member. While most covenants require a budget, spending the extra time to create a realistic and effective budget will ensure that there’s adequate money for today’s operations as well as tomorrow’s maintenance requirements. Here are 5 quick tips to help everyone work together to create the right budget for your community:
- Set goals. Start by discussing what you’d like to do differently to maintain or improve your community next year. It could be renovating the clubhouse, or enhancing the “curb appeal” of homes through stricter adherence to architectural standards.
- Update the current budget. Document year-to-date actual expenses vs. budget and include the reasons for major variances, such as excessive pool repairs. Understanding why revenue or expense categories varied from budget will make the budgeting process easier.
- Create a forecast. Using the current budget as a starting point, adjust revenue and expense categories based on goals and reality. You’ll never collect 100% of dues (aim for 95%), prices go up, and many contracts include automatic annual increases.
- Balance and compromise. Completing your balanced budget is an exercise in prioritization, compromise, and patience. You’ll most likely need to make some tough decisions that may upset a few neighbors, including potential dues increases or assessments.
- Maintain the reserve account. Allocate enough money to fully fund your reserve account as determined by your reserve study? Don’t have a current reserve study? Make sure you budget for that as well!
Once you’ve completed the budget, share it with your community, along with the major decisions and compromises made in order to balance the budget. That additional layer of transparency may help minimize questions and negative feedback. Have any questions about HOA budgets? Please contact us.
Neal Bach, CPA