Most of us can successfully keep track of our personal finances, but it’s not something we get excited about. Now imagine trying to document income and expenses for a multi-million-dollar association.
If you have served or currently act as an HOA board member, you have a first-hand account of what it’s like to maintain financial records on behalf of an entire community. Some would describe it as painful, and even skilled volunteers will admit this task is tedious and time consuming.
For these and other reasons, some HOAs hire a bookkeeper. Could this option be right for your association? Keep reading to find out more!
Table of contents
- What does a bookkeeper do?
- HOA bookkeeping
- Who normally does the bookkeeping in an HOA?
- When should an HOA hire a bookkeeper?
- Is there a difference between an accountant and a bookkeeper?
- Alternative options
What does a bookkeeper do?
Bookkeepers work in virtually every sector since no business, charity, association, or club can operate without money. Bookkeepers are professionals who help all of these organizations keep their finances in order. They manage general accounting ledgers, review discrepancies, and generate financial statements.
In short, they take care of day-to-day business finances.
Below is a list of responsibilities that bookkeepers can manage:
- Complete data entries for incoming and outgoing bank accounts
- Use software to post current financial transactions
- Reconcile or report discrepancies in financial reports
- Track debits and credits
- Create financial reports
- Review financial records
- Create and pay invoices
- Manage payroll
Bookkeepers also make it easier for organizations to build realistic budgets, identify trends, and plan for the future.
HOA bookkeeping
When it comes to HOA bookkeeping, a bookkeeper uses financial documents to ensure all the books are balanced. They help the board maintain the financial health of the community by keeping accurate records and producing consistent reports.
Owners become rightfully upset when a board mismanages their money. Poor financial record-keeping can lead to overspending or underfunded reserves. Both scenarios leave the community in a precarious financial situation. However, bookkeepers, especially those with HOA experience, will help prevent these situations from occurring.
Furthermore, since bookkeepers are not part of the HOA, they can provide the board with an objective opinion of the current budget, and share tips for managing the HOA’s finances more efficiently.
Who normally does the bookkeeping in an HOA?
In a self-managed HOA, the board treasurer is often tasked with bookkeeper duties. However, HOA bookkeeping does require specialized knowledge, even if the person is not a trained bookkeeper.
Keep in mind that board members change every few years, and if there are no structured processes in place, the new treasurer may document finances in a different way than the former treasurer. Though the numbers may still be accurate, it becomes more challenging to compare the numbers and create educated budgets for the future.
HOAs that have partnered with a management company will usually get the company to look after the bookkeeping. It is a complex and ongoing responsibility, and most volunteers don’t have the time or knowledge to take care of bookkeeping on their own.
When should an HOA hire a bookkeeper?
If you feel like your community is always second-guessing financial reports, or if balancing the books is taking up all of your treasurer’s time, then your HOA may be ready for professional bookkeeping help.
You’re spending too much time crunching numbers
Board members are volunteers, but that doesn’t mean their time isn’t valuable. In fact, the Foundation for Community Association Research calculated what a board member’s time is worth, and concluded that they would be owed about $32 per hour for their work.
If you feel as though you or your team member is generally spending too much time on bookkeeping, you can compare your “salary” against the price of a professional bookkeeper’s fees.
Once you treat the time the board spends on bookkeeping as an actual expense in cash, you’ll have a better idea of whether you should outsource this task.
The numbers are never entirely up to date
If the HOA books don’t reflect the actual state of your finances, it becomes very hard to understand the association’s cash flow and accurately gauge its financial health.
Furthermore, tax season becomes truly awful when there are numbers missing from the records.
Software can help automate financial record-keeping, but a bookkeeper will ensure records are up to date.
Cash flow is not predictable
This ties in with the previous point. If the HOA forgets to pay invoices and document receipts, statements cannot be considered accurate. This can cause unpredictable cash flow, and makes it harder for the association to determine if it has enough money to cover expenses. This problem ultimately creates more work for the board. Members must go back and find out what numbers are missing or incorrect in order to produce an accurate financial picture.
Hiring a bookkeeper can help eliminate that problem and allow the board to focus on other tasks.
Is there a difference between an accountant and a bookkeeper?
Yes! A bookkeeper manages day-to-day financial tasks, while an accountant provides advice and can tackle more complex items such as financial forecasts, auditing and tax preparation. An accountant can provide bookkeeping services, however they will likely charge more because they are required to obtain certain credentials.
Bookkeepers are a more appropriate choice than accountants for standard HOA financial tasks. They are not required to hold college degrees. However, some bookkeepers do have degrees in accounting or business. Furthermore, they can achieve national certifications from the American Institute of Professional Bookkeeping (AIPB) or the National Association of Certified Public Bookkeepers (NACPB).
The more experienced a bookkeeper is, the more they will charge. But they will also complete the work in less time and may provide more value to your HOA.
Alternative options
HOAs can also consider these options if they want help with financial management, but aren’t looking to hire a full-time bookkeeper.
Bookkeeping software
Smart financial software like QuickBooks or Xero will lighten the workload for HOAs. This software can do things like automate owner payments, streamline payroll, and alert you when bills are due.
Bookkeeping software allows the board to remain in control of their numbers, and creates a structured system that new board members will be able to duplicate.
Best of all, some financial software systems integrate with property management software like Condo Control so that you don’t have to choose between two great solutions.
Property management company
As mentioned earlier, most property management companies will provide financial management services. However, associations may be asked to pay an additional fee for these services.
There are even companies solely dedicated to helping community associations with financial management.
Remote or virtual bookkeeper
A remote or virtual bookkeeper works entirely online, which can be convenient and cost-effective. A virtual bookkeeper will have their own equipment and cloud-based accounting software, and may offer more flexible rates.
However, the HOA must be comfortable keeping and sharing electronic documents. Since the bookkeeper won’t be onsite at any time, the board must send records, invoices and receipts electronically.
Conclusion
Bookkeepers help organizations, including HOAs, stay on top of standard financial management.
If the board isn’t comfortable managing numbers on its own, a bookkeeper is a great resource to consider. Not only do these professionals charge less than accountants, but they can free up dozens of hours for busy board members who don’t have time to check the numbers twice.