If so, you must understand the importance of setting your HOA’s annual budget and dues, as you are responsible for the community to run smoothly financially.
One of the most critical responsibilities of an HOA board is setting the annual budget and dues. This can be a complex process, as it involves balancing the community’s needs with the financial reality of the HOA’s income and expenses.
Here are some things to keep in mind when setting your HOA’s budget and dues for the year:
1. Consult with the HOA’s financial advisor
A good start is to consult with the HOA’s financial advisor to get a realistic picture of the HOA’s income and expenses. The advisor can also guide how to allocate funds and efficiently use the HOA’s resources.
Once the advisor has been consulted, the board can begin to develop a budget that meets the needs of the HOA while keeping dues within a reasonable range.
2. Keep your HOA’s financial history in mind
Review past years’ budgets and expenditures to get an idea of where you should be financially. This will help you set realistic goals for the upcoming year and identify any areas where spending can be reduced.
3. Know your HOA’s income sources
It includes things like dues, fines, fees, and investments. Make sure you clearly understand how much money is coming in and where it comes from.
4. Anticipate your HOA’s expenses for the upcoming year
You must include things like operating expenses, repairs and maintenance, legal fees, etc. Again, review past years’ budgets to get an idea of what to expect.
5. Determine how much money needs to be set aside for reserves
Reserves are funds that are set aside for unexpected expenses or future projects. It is generally recommended that HOAs set aside 10-20% of their annual budget for reserves.
6. Start setting your HOA’s annual budget
Once you have all the information stated above, you can start setting your HOA’s annual budget!
Make sure to consider your HOA’s financial history, income sources, anticipated expenses, and reserves when creating your budget. And remember, it is always better to overestimate rather than underestimate when it comes to finances.
Setting your HOA’s annual budget and dues can seem challenging, but it doesn’t have to be. Keep these tips in mind, and you’ll be on your way to creating a successful budget for your HOA.
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