Just how important is Financial Management?

In our dealings with home owners we realized that the importance of financial management and the continuity thereof is often left on the back burn as a result of the fairly frequent changes in the board composition of the HOA. As a result, quite a few HOA are left in a position where planning around cash flow can become quite a nightmare.

Debtors collections increasingly is becoming a major challenge in any business, so much more in a HOA. As a result cash flow is under huge strain, but more so, the opportunity cost is increasing consistently through interest income being lost. Weekly debtors meetings between the estate manager and the financial manager is critical to ensure that the book is being managed closely and remains under control.

A finance and investment policy is in most instances absent and yet so important. There is an obligation on the board of the HOA to ensure that sufficient funds are reserved and allocated into fund for capital and other projects. Good governance in this regard is imperative.

Monthly management reporting and regular meetings between the finance team and the board are tools that will equip the board well in terms of decision making. Budgets have to be set and reporting on any variances between actual and budget is necessary to avoid overspend. This type of reporting has also proven to drive down annual audit fees.

Paying a finance team is often perceived as a “grudge purchase” and it can be true when the finance team is inefficient and letting down the business, but it is important to find the right team to compliment the HOA and in particular the board from a decision making point of view.