The end of the year is approaching fast, which means it is time to start your 2021 HOA budget. You should start your HOA budget process now to give your HOA enough time to create an effective budget for next years.
There are some essential items, documents, and steps to take to prepare for next year’s budget. While each HOA is different and will need certain unique provisions, there are starting points to help any HOA initiate the budget process.
Below are a few steps to set up your homeowner’s association for success when creating next year’s budget.
Step 1: Create a Timeline
The budget planning process is a complex activity that must start early so the budget can be finalized and approved prior to the beginning of the new year. Creating a timeline will help your HOA stay organized and on track.
The first task on your timeline should be collecting necessary documents and materials, if you haven’t already done so. This can include your HOA’s reserve study, contracts and vendor agreements, operating expenses, and any other financial documents you have.
The next item on the timeline will be the actual construction of the budget. This will require the planning of meetings, creation of a physical budget document, and finding where you can cut costs, or where you may need to have increases.
Constructing the budget can be challenging. It may be worth considering finding an HOA management company to assist you with the details and structure of your HOA budget.
The last part of your timeline will be reviewing your draft budget, making any necessary last-minute changes or provisions, and then finalizing and distributing the budget.
Step 2: Define Community Goals
Your HOA goals will largely define what must go into your budget. What do you want to accomplish in the upcoming years?
For instance, if your community is planning to install a new playground, factor that into your budget. If it is an expensive undertaking, you cannot just drastically increase HOA fees. A good idea would be to dedicate a certain amount from HOA fees to the project, and allow enough time to save up for it over a period of a few years.
Remember, community goals come from the community. These are not objectives your homeowner’s board alone can decide on. A good practice is to survey residents before your budget planning session to gather information. Then, assess these goals and identify which ones are worth pursuing.
Step 3: Anticipate Expense Increases and Contact Vendors
There will be unavoidable expense increases every year. This is something you need to anticipate and expect when planning your budget. A good way of determining what some expense increases will be is by contacting your vendors.
Contact existing vendors to find out what their anticipated increases may be for the coming year. Examples of these operating items include contracts for landscaping, pest control, pool maintenance, etc.
Another area to look for possible increases is within your maintenance and utility expense. You can contact local utility companies and they will tell you what their increases will be for the next year. You can also use historical information to compute the estimated annual expense.
Once you have completed these three steps you should be able to begin your HOA budget. If this is your first time constructing an HOA budget, or if you would like some assistance in taking some of the stress off you and your HOA board, consider hiring an HOA management company.
Atlantic and Pacific Management offers a full spectrum of HOA management and customer support services in San Diego County. A&P can review all your HOA needs including assistance with your budget. Reach out and see for yourself how A&P can help your HOA become more successful.