HOA Financial Management Tips: Part 1
As a member of your Homeowners Association (HOA) Board of Directors, prudent financial management is a paramount responsibility. This encompasses securing cost-effective vendors, making sound investment decisions, and ensuring that homeowner assessments adequately cover both immediate and long-term community needs. Often overlooked, however, is the potential for significant savings by scrutinizing the fees charged by your management company.
Lower HOA Administrative Costs
Management contracts, regardless of the company’s size, typically include an exhibit detailing “ancillary fee” (often labeled Exhibit A). These charges cover services beyond the base management fee and can include expenses such as photocopying, postage, collection costs, governmental filings, and crucially, the preparation and distribution of assessment billing statements (whether by mail or email). For communities with monthly assessments, the cumulative cost of these statements can be substantial. This cost-saving strategy is also applicable to communities with quarterly billing that may wish to transition to less frequent billing cycles, such as semi-annually.
Quarterly Billing for HOAs
While state law mandates the issuance of assessment statements, it’s important to understand that the frequency of these billings is often within the HOA’s control. By transitioning from monthly to quarterly billing for your HOA, your community can reduce the number of statements issued by over 60%, leading to significant cost reductions. Consider a 100-unit community currently paying $1.00 per statement monthly. This translates to an annual cost of $1,200. By switching to quarterly billing, HOA annual assessment billing drops to $400, resulting in a savings of $800 per year. We encourage you to calculate the potential savings for your own community or don’t hesitate to contact Mickey with HOA Consultants to explore your HOA billing frequency options.
Before implementing such a change, it’s crucial to carefully consider the impact on your homeowners. Key considerations include:
• Homeowner Budgeting: What is the current monthly assessment amount, and can homeowners comfortably budget for payments four times per year instead of twelve?
• Delinquency Policy: How will your delinquency collection policy be adjusted to align with the new assessment schedule?
• Transition Period: Should homeowners be given a period to adjust to the new schedule before late fees or other costs are applied?
Proven Results
A single-family home board that HOA Consultants works with recently transitioned to quarterly billing on January 1, 2025, and it has proven to be a beneficial cost-saving strategy for their community. If your HOA board is looking for strategies to cut HOA expenses, lower HOA administrative costs, help with HOA budget planning, or HOA financial management tips to reduce HOA management fees, contact HOA Consultants today for a no-obligation consultation.
BIO: Mickey Latz, MBA, CMCA, AMS is the president of HOA Consultants, LLC. He consults with boards, business partners and management companies. He is the former owner of Golden Valley Property Management which he started in 2003 and sold in 2022. He can be reached at 602-402-1955 or mlatz@HOA-Consultants.com.