Preparing a budget can be a long, painstaking task. However, it needs to be done with a fine-toothed comb.
The board needs to take time to come up with a budget that is as accurate as possible. It’s important to do research to get a good estimate for your budgeting needs.
Start by reviewing the previous year’s budget. In fact, it can be helpful to look over the last two to three years to get an even clearer picture of what your budget should look like. Consider what you’ve budgeted for in the past and whether or not you had money left over at the end of each year.
You can’t base all of your needs on past budgets though. You’ll want to send out requests for proposals (RFPS) to any of the contracted companies or individuals that you work with. You want to get estimates for what the rates will be this year. Rates can fluctuate, which is why it’s important to get updated information as you compile your yearly budget.
Take a look at what you have in reserve and consider what additional needs you may have over the course of the year for maintenance and other projects. What can your reserve funds handle? You want to make sure that your reserve continues to have funds in it, so consider what projects are a priority and which ones can be put off.
As you formulate a budget for your coming year, you’ll also want to think about what your needs are and factor in any increased expenses. You’ll also need to figure out how much income you’ll be receiving over the course of the year from fees and additional sources. This will help you determine if housing fees need to go up (assuming it doesn’t violate any rules or laws) and/or you may need to increase assessment fees for specific needs. Some HOAs require that fees be split up evenly, others do it per the percentage of ownership.
Make sure to thoroughly analyze your budget and all of the needs that you may encounter over the year. Then, come up with a plan. Once your budget is ready and approved by all of the board members, you’ll need to share it with the rest of the HOA community. Don’t just share the plan — make sure to lay it out for them, making note of any potential increases. It’s important that you’re transparent in your decisions as a board and that your community can have a clear picture of the budget.
If you’d like help managing your HOA budget, contact us today: https://mmraccountingc.wpenginepowered.com/. We’re here for you.
