Homeowners associations across the country are experiencing trouble with cash flow. Associations are spending too much, members are not paying their dues in a timely manner or not at all, and the rising number of foreclosures has left many associations “strapped” for cash. In the climate of today’s economic down turn, homeowners associations are constantly looking for ways to increase their cash flow. The following are a few ideas that can assist in this area:
Reduce Spending: Review the budget to identify areas of service and maintenance that the HOA can reduce or do away with. Renegotiate contracts/prices with vendors and other service providers.
Special Assessment: Special Assessments are an often used measure to increase cash flow. It provides a means for the Association to obtain cash quickly and get bills paid. Bank Loan or Line of Credit: Bank Loans will provide an Association a “lump sum” of cash that can be paid back over time. A Line of Credit will offer the Association an opportunity to “draw down” on a Line of Credit to assist in times of cash flow crises.
Investments – There are a number of avenues for Associations to invest in. Savings Accounts, CD’s, Bonds, Treasury Bills, Treasury Notes, etc.
When investing funds, associations should always take into consideration the three (3) essential objectives of investments:
- Safety: The principal (amount invested) should be protected from a loss as much as possible. Are the funds being invested with an insured entity? What is the stability of the institution? These are questions that should be taken into consideration.
- Liquidity: The ability to turn the investment into cash or its equivalent.
- Yield: The rate of return on the investment.