Pros and Cons of an Out-Of-House Bookkeeper

HOA bookkeeping is a necessary part of managing any HOA. Doing it well proves an association’s competence and demonstrates its investment in the community to association members. Solid financial management and trustworthiness are some of the most desirable traits for HOA management because of residents’ inherent desire to keep their property values high and their neighborhoods running smoothly. 

But, many consider the tasks involved in HOA bookkeeping complicated and downright overwhelming, leading some HOAs to rely on expensive external management companies and third-party bookkeepers to take away the stress of managing finances. These options can undoubtedly benefit the association, but they also have drawbacks.  

Luckily, many options exist to tackle the daily, weekly, monthly, and annual duties that come with HOA bookkeeping:

• Complete all bookkeeping in-house with volunteers.
• Hire an HOA management company to take over all aspects of managing the HOA, including bookkeeping. 
• Partner with a trusted external bookkeeper.

Being informed on what each path would mean for your specific HOA allows you to make the best decision for your board and, most importantly, your community. 

HOA Bookkeeping: An Overview

Sound financial practices, like maintaining a reserve fund, are indispensable to most HOA members. Achieving financial stability takes a lot of work, attention to detail, and a strong moral obligation to serve the community. Understanding what goes into HOA bookkeeping is essential before deciding how to delegate the various tasks involved.

Bookkeeping procedures may be unfamiliar if you’re a new HOA volunteer or considering becoming a self-managed HOA after years of using an HOA management company. Even if you are actively involved in your HOA’s bookkeeping, it doesn’t hurt to refresh and ensure you’ve included everything in your HOA bookkeeping practices.

HOA bookkeeping tasks should include: 

• creating and sticking to budgets
• accurately updating the balance sheet
• maintaining and examining income and expense statements
• managing the general ledger 
• tracking cash disbursements 
• remaining aware of bills due
• monitoring bank accounts daily
• completing annual audits 
• filing tax returns on time

Between these daily, weekly, and monthly tasks, large annual projects, and emergencies, HOA bookkeeping can be a full-time job. Volunteers who make up an HOA board have limited time to be bookkeepers due to their careers, families, personal projects, and lives. Maintaining these financial documents and overseeing the budget of a large association is complicated, and board terms are temporary. Training new board volunteers on HOA bookkeeping practices every year or so takes time, and inevitably, knowledge is lost. 

These are some of the biggest reasons HOAs turn to outside management companies and out-of-house bookkeepers to manage their bookkeeping. But, there are some disadvantages to hiring a third-party service.

Disadvantages of Hiring an Out-of-House Bookkeeper for Your HOA

As the old saying goes, time is money. While freeing up board members’ time is an immense benefit to hiring an out-of-house bookkeeper, that free time comes with a cost. HOA management companies that include bookkeeping services can cost upwards of tens of thousands of dollars per year, a substantial chunk of many associations’ budgets. Out-of-house bookkeepers cost a pretty penny also, with hourly rates, retainer fees, and commissions adding up to hundreds or even thousands of dollars each month. 

Losing control over financial data is another cause for concern when hiring an out-of-house bookkeeper or outside management company. A lack of internal oversight of the association’s finances can lead to trouble if data or money are misused. It’s crucial to find a trustworthy out-of-house bookkeeper who allows association members access to financial records to ensure there are no discrepancies or warning signs of fraud.

HOA bookkeeping looks different even from the bookkeeping of businesses with similar budgets. Even an experienced general bookkeeper might need more familiarity with HOA-specific laws, regulations, and procedures, which results in extra time (and cost) required to get the bookkeeper up to speed with the specifics of HOA bookkeeping. In a worst-case scenario, it can lead to inaccurate bookkeeping going unchecked. Looking for an out-of-house bookkeeper specializing in HOAs, particularly HOAs within your locality, can prevent these headache-inducing circumstances.

Red Flags to Look for in a Third-Party Bookkeeper

Some disadvantages are simply unavoidable. For example, hiring an out-of-house bookkeeper will always cost more than relying on a volunteer. But, many disadvantages can be avoided by watching for these red flags when hiring a bookkeeper or management service: 

1. There’s no transparency. If you cannot view the financial documents, this is a huge red flag indicating possible misappropriation of money, future litigation, and residents’ distrust. 
2. Communication is difficult. It shouldn’t be hard to track down your bookkeeper. If you’re not hearing from them regularly and find contacting them difficult, consider seeking another bookkeeping service or HOA management company. 
3. Everyone makes mistakes, and one small error doesn’t necessarily mean you need to switch bookkeepers or management companies. But, if significant mistakes happen regularly, it may indicate that the bookkeeper is mismanaging your money. 

Advantages of an Out-of-House Bookkeeper for Your HOA

Hiring an experienced, detail-oriented, and ethical bookkeeper can bring considerable advantages to your HOA. Having an independent third-party bookkeeper double-check your HOA’s bookkeeping practices improves the accuracy and consistency of your financial records, preventing mistakes and internal misuse of funds. Not only can an external bookkeeping service double-check your processes for human error, but some use modern-day automation to avoid human error in the first place. 

Hiring someone outside of your HOA to track finances avoids potential conflicts of interest or fraud from members of your organization. It’s not unheard of for board members or volunteers to use their positions for their own financial benefit or gain, despite the illegality and harm it causes to other members, and an external bookkeeper can ensure this doesn’t happen in your association.

Finally, an out-of-house bookkeeper brings additional expertise to your HOA bookkeeping. A trusted professional HOA bookkeeper can offer years of industry experience and knowledge to help your association to comply with laws and regulations on a national and local scale. 

No Cons with PayHOA

PayHOA knows HOAs. We’ve been selected by over 5,000 HOAs and managed nearly 500,000 units across the United States. Our expert staff can assist you with your HOA management needs. 

PayHOA’s bookkeeping service can relieve your volunteers of extensive and complicated HOA bookkeeping tasks without draining your budget. Our bookkeepers allow easy and transparent access to your bank accounts, financial reports, and transactions. With 98 percent client approval, our accuracy in handling HOA financials is proven by our customers’ satisfaction. 

Finally, we provide additional support any time of year, but especially during audits or tax time. We can even prepare your taxes for you. Hiring PayHOA helps your association achieve financial stability with consistent and accurate bookkeeping. 

Our services include:

• transaction coding
• monthly bank reconciliation
• monthly and annual reports
• assistance with your budget
• general bookkeeping support and more

Call us today to set your association on the path to financial success and free your volunteers’ time. Our financial experts are willing and ready to discuss your HOA’s needs and see how PayHOA may serve you. 

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