The annual budget is a vital part of every organization’s finances, whichever industry or sector it belongs to. The same applies to homeowners association, and as every new financial year dawns, a proper budget must be drafted out. Despite the significance, there are so many organizations that fail to do so, and thus face a lot of financial trouble in the year ahead; something they could have easily avoided had they been proactive. So if you do not want all your funds used up half way through the year, plan now. Here are some guidelines that can help you with this.
Determine You Current Financial Situation
The first step in creating every budget is to evaluate and assess your current financial standing. Go through your records of the last two years and analyze them thoroughly. You can even review the budget of your previous year. Note down areas where you spent more than more or where you did not spend enough, and amend all these things in the new budget.
Prioritize Your Repair And Replacement Projects
Repairs and replacement are a significant part of every HOA budget, and need to be handled properly. While doing so, keep one thing in mind, you cannot take care of all of them at once. As such, prioritize them on the basis of their urgency and importance. Only then will you be able to manage them effectively.
Focus More On Needs Rather Than Wants
The expenses of an HOA can be divided on the basis of needs and wants. As an example, everyone wants landscaping to be appealing, but everyone needs a secure environment. As you can see, both are important, but naturally the needs come first rather than the wants. So when you plan your budget, cater to the needs, and then turn your attention to the wants.
Factor In The Bills
Every year, the utility rates rise, and you should consider this when you prepare the budget. Contact a local agency and they might be able to provide you with a price rate schedule that has been decided beforehand. All increases in utility rates are made with respect to this, and accordingly, you can plan out your budget.
If you cannot find any information, you can expect an increase of around 7% on a yearly basis.
Analyze Your Contracts With Vendors
A homeowners association has contracts with a number of other agencies such as a landscaping company, a property management firm, a pool contactor, and so on. Discuss your contract with all of them, and if they have any plans to increase their fees, include it in your budget. Generally, this is often the case, so you should always budget for it.
Save An Amount For Future Use
Savings should be a part of every budget. Of all the income you earn, try to deposit at least 20% of it in a reserve or saving account.
Planning a budget is important for every homeowners association, but that is not just it. You will also have to make sure that you follow it throughout the year.