Last modified on February 7th, 2023
By Brittany Benz
How does your association management business handle its accounting and reporting? Based on a recent survey AppFolio conducted of HOA and COA board members, “funds management and financial reporting” is one of the top responsibilities board members expect their management company to handle effectively. However, many businesses struggle to do so, whether because of limited bandwidth, manual processes, or a lack of capabilities.
When your association financials are inefficient and disorganized, it’s harder for your boards to get a clear picture of your community’s financials, which can negatively impact board satisfaction; and other aspects such as budgeting, taxes, and accounting for the year.
In this article, we’re going to detail some of the common accounting challenges in association management, and how you can overcome them and streamline your processes. While this article contains helpful information, we not providing legal advice and you should consult a qualified tax attorney for any specific questions about your accounting processes or taxes.
Challenge #1: Wasted Time & Inefficiencies
Probably one of the most common challenges association management businesses face when it comes to accounting is that manual data entry or switching between systems is tedious and takes up too much time. These kinds of process inefficiencies trickle down into other aspects of the business and cause teams to have less time to focus on bigger initiatives, such as career and business growth, all of which can lead to employee burnout and turnover.
Solution: Move to a Paperless System
A relatively simple solution to this issue is to go paperless. A paperless system — a system where all of your financial records, data, and files are stored digitally — can speed up invoice processing by eliminating the back and forth between vendors, team members, and financial institutions. When all files can be accessed online, from anywhere you can quickly retrieve and access documents in just a few clicks. Thomas Wood of J A Wood Management, who oversees 60 associations, has experienced the benefits of going paperless. He and his team have been able to cut the time they spend on bookkeeping down substantially: “Bookkeeping used to take 3 days to reconcile and now it’s down to 4 hours. Bill paying went from 9 hours to 3,” says Thomas.
Challenge #2: Inconsistent & Inaccurate Data
Another problem we see often in association management accounting is that data is inconsistent and inaccurate. This is usually caused by entering information by hand from paper sources or multiple spreadsheets, which leads to human error and greatly increases risk and the chance of an audit. Additionally, errors in the data can result in the board making the wrong decision when it comes to budgeting — a consequence that can negatively impact financials for the entire year.
Solution: Lean on Automation
Today’s new technological advancements can help solve for this. Automated tools within a digital system can input the information on your behalf, ensuring accuracy. For instance, with an automated accounts payables system, all of your invoices are received, scanned, and processed automatically, so all you have to do is review the invoice. When everything is stored digitally and updated automatically, you can catch mistakes early, and mitigate risk and human error. Storing important information online is also more secure than paper files, as they are generally encrypted and available for a restricted set of users.
Challenge #3: Lack of Insight Into Financial Health
Lastly, having insight into the financial health of an association can be a major challenge. If you use disparate systems, it’s harder to have a complete picture of your associations’ finances as data is stored in different places and there’s no cohesive view. When your finances are confusing or lacking, board members may not trust your association or be dissatisfied, which can lead to a loss of business. Additionally, limited accounting solutions generally don’t offer the ability to create specific reports, which makes it difficult for you to effectively communicate the health of the association to your boards and for them to make the right decisions for the community.
Solution: Pivot to a Single Solution
Rather than using a separate accounting system to manage your association financials, consider adopting just one solution that has every workflow within your business on one platform — from accounting and reporting to violations and maintenance. When all of your association financials are integrated with the rest of your business processes in a unified, digital system, you save time from having to do double or manual entry, and are able to instantly gain visibility into your finances.
By implementing a system like AppFolio Property Manager, with a strong accounting foundation, you can optimize your accounting and reporting processes, save time, and create space for growth. AppFolio includes flexible accounting and reporting tools and also has numerous bank integrations that allow you to seamlessly manage all of your associations’ financial duties. To learn more about how financials work in AppFolio Property Manager, take a look at this overview.
As you know, community associations have complex needs when it comes to financials. The challenges mentioned above can be solved by uncovering hidden inefficiencies and rethinking how you run the financial arm of your organization. By moving to a paperless system, putting automated tools to work, and consolidating all of your accounting workflows, reports, and communications into one solution, you can keep the financial health of your associations in peak condition. Take a look at this guide for more ways you can optimize your accounting operations.
Comments by Brittany Benz