July 20, 2016
Many board members dread the annual association budget season. Cost accounting and negotiating new contracts isn't something most people look forward to. And, we're just now welcoming in August, so some of you may be wondering why our Axiom Resources team is bringing up the subject now. After years of serving HOA and COA clients we've discovered that even if your fiscal year runs concurrent with the calendar year, mid-summer is the perfect time to review your records and prepare for next year.
Preparing to publish a proposed budget naturally starts with a review of the governing documents. If you're planning to add (or increase) assessments in the new calendar year, you must first determine whether your proposed changes can be approved with a vote only from board members, or if you have to gain consensus from all association members. You'll also want to verify the restrictions and limitations imposed by state laws and confirm advance notice requirements for homeowners. All of this takes time, even before you start thinking about whether or not to budget for higher, or lower, common area utility charges and planned repairs or renovations.
Serving your members responsibly means . . .
While many people understand why the annual budget review is important for maintaining financial stability, some don't realize how vital it is to communicate with homeowners during the process. Members need to know their board members are actively looking for ways to protect the value of their property and reduce operating expenses when practicable.
When you begin your annual budget preparations early, you have time to thoughtfully consider every contract to make sure the relationships are a best-fit for your association clients and their homeowners. With sufficient time, you can keep homeowners in the loop from the first review of the covenants, conditions and restrictions that will spell out the rules of the community to approval of the final budget. Early review ensures there is time to schedule full membership meetings and contact all members for input before renewing contracts or adding new services.
Negotiating contracts like a homeowner, not a just board member, means . . .
Homeowners must live within their budgets or they will quickly get into trouble. The same principle applies to association decision-makers. An in-depth review of past expenses may reveal opportunities to curtail annual costs. For example, two of the largest line items in the expense budget every year for many associations are legal fees associated with collecting debt and allowances for outstanding bad debt. This is one area where many boards could do better by their members.
Many things can influence bad debt ratios. Members go through financial ups and downs, the economy responds to national and global events, and sometimes, board members aren't aware of debt recovery services that can help them take control of bad debt and legal fees associated with collections without adding a single penny to the budget.
HOA budget season, you can make sure that managing bad debt and legal fees won't burden your association next year
If your board could reduce bad debt allowances without increasing legal fees or burdening all homeowners because a few members face financial challenges, wouldn't you do it without hesitation? Call an Axiom Resources debt management professional to find out how your community association can benefit from partnering with a skilled debt recovery team. The consultation is free, and you won't have to add a single penny to your annual budget – a win-win for the association and your members.