As the treasurer or member of the board of directors for your homeowners association (HOA), you may be responsible for creating the budget for the coming year. Setting up a budget can be a challenging task, which is why our team at Red Rock offers to do most of the heavy lifting for our boards each year.
Establishing a budget is an important part of managing the finances of your HOA and ensuring that you have the funds needed to maintain and improve your community. Here are some tips for setting up your HOA budget for the new year:
Review the previous year's budget: The first step in setting up your budget for the coming year is to review the budget from the previous year. Look at the actual expenses and revenues for the year, and compare them to the budgeted amounts. This will give you a sense of what worked well in the previous year and what areas may need to be adjusted in the coming year.
Assess your HOA's financial goals: Before you start creating a budget, it's important to have a clear understanding of your HOA's financial goals. Do you want to save money for a reserve fund, make improvements to the community, or keep monthly dues as low as possible? Knowing your financial goals will help you prioritize expenses and allocate funds appropriately.
Determine your expected revenues: Next, you'll need to determine how much money you expect to bring in for the coming year. This may include monthly association dues from members, fees for use of amenities, and any other sources of income. Be sure to take into account any changes in the number of members or anticipated increases in expenses.
Estimate your expenses: Once you have a sense of your expected revenues, it's time to estimate your expenses for the coming year. This may include operating costs such as utilities, maintenance, and insurance, as well as capital expenditures like major repairs or improvements to the community. Don't forget to also budget for contingencies, such as unexpected repairs or legal fees.
Create a draft budget: With all of this information, you can now create a draft budget for the coming year. Be sure to allocate funds appropriately, keeping in mind your financial goals and any anticipated changes in revenues or expenses.
Review and finalize the budget: Once you have a draft budget, it's important to review it with the rest of the board and get feedback. Make any necessary adjustments, and then vote as a board to approve the budget.
Ratify: The last step is to ratify (or publicly vote on) your proposed budget with your community owners. This is typically done at your annual meeting or budget meeting. Be sure to review your bylaws and CCRs for your community's documented process.
By following these steps, you can create a budget for your HOA that will help you manage your finances effectively and achieve your financial goals for the coming year. If you have any additional questions feel free to reach out to us at Red Rock by emailing firstname.lastname@example.org or visit our HOA services page to learn how we can help your community association!