An HOA is a planned community where hundreds or thousands of people live together. In such big communities, the HOA board has to take care of various kinds of expenses, such as repairing the street lights, painting the fences, replacing the broken park benches, buying new equipment for the gym, and many others. Therefore, there must be a budget in place.
Every year the members of the HOA board conduct an annual meet and have various important discussions, including budget planning. Self-managed boards where no members have the appropriate knowledge about budgeting can create huge mistakes that can take a heavy toll on the community’s finances. By hiring Chandler HOA management services, you can be sure that your finances are in the right hands.
Worst HOA budgeting mistakes
Not analyzing past financial reports.
One must go through the financial reports of the past few years. As costs of things and services keep changing every year, past reports can help estimate a rough sketch of future expenses. Moreover, this practice also enables you to understand where you went wrong with last year’s finances.
Not taking insurance seriously.
Insurance is essential for anyone, and an HOA is no exception. In cases of sudden, costly expenses, insurance can help lift some financial burdens. If there is no insurance, the HOA would have to use all its funds and have nothing left for other requirements. When creating a budget, make sure you find the best insurance coverage. If you already have one, make sure to review it and see if it needs an upgrade.
Not considering inflation.
Inflation is as prevalent as ever, and not considering it is a silly mistake. The board must analyze the percentage of inflation and establish new monthly fees for the residents. Homeowners may not be happy with the increase in fees; however, ignoring inflation can cost them in the long run. For example, not taking inflation into consideration can cause the HOA not to have enough money to repair the community’s essential amenities.
Not putting money aside for reserve funds.
When deciding the monthly fees and assessments, the board must consider reserve funds. The reserve funds act as a safety pin in case of sudden repairs, replacements, and other costs in the community. A certain percentage of the monthly dues from residents should go into the fund.
Not clearing debts.
Do not mistake planning a budget for the next year while you still have debts to pay. Before starting to plan, make sure you clear all debts and unpaid dues. This way, you won’t have to create a new plan again when they come to collect their payment.