Community Association Budget Preparation and Reserve Analysis
Preparing your association’s annual budget can be a source of stress, but more importantly, it’s a valuable opportunity to ensure the financial well-being of both your association and homeowners. Proper association management hinges on this financial tool for both short-term and long-term planning, so it’s important to follow some guidelines.
As community association managers, board members and unit owners are aware, condominium and homeowners’ associations (HOAs) are required by Florida Statutes (FS) and, generally, by the association’s by-laws, to prepare annual budgets. The annual budget requires considerable effort and is, in essence, a financial plan for the upcoming year. The budget is the benchmark by which an association’s results of operations are measured. If actual expenses approximate those budgeted, it is perceived that the budget was well thought-out and the financial management of the association was effective. If, on the other hand, there are substantial variances between the budgeted and actual expenses, this may suggest that the budget was poorly prepared and/or the association’s operations were poorly monitored.
The importance of your budget cannot be overstated. It drives your maintenance plan, your social activities, capital improvements and more that affect property values and the lifestyles of your residents. Plan your budget with property values in mind, and everyone’s happy.
On the flip side, if you don’t have an effective, actionable budget for your community, you can’t provide social activity programming, implement a preventative maintenance program or make improvements to your community. Residents’ lifestyles will suffer and could become unsatisfied with your association, which can lead to increased turnover and even vacancies, negatively impacting your property values.
To prevent those problems and secure your association’s longevity, we have created seven focal items to prepare an annual budget that works.
- Working Capital
- Reserves Balance and Funding
- A/R Collection and Delinquencies
- Review Association SOP
- Long Term Financial Projection
BP Strategics has extensive experience in providing professional services to condominium and homeowners’ associations. We are most knowledgeable and support your Association on best financial practices for annual operations, reserves analysis and funding, special projects, special assessments, financing alternatives, and more.
Just remember – you’re not planning for the next year, you’re planning for the longevity of your community, preserve, upkeep and enhance your property value. The financial health of your community, including your property values and the lifestyle of your residents, all hinges on creating a budget that works for your association.