Many homeowners and board members struggle to understand their financial reports, which can hinder their ability to make informed decisions about their community's finances. Truth is, not all of us have experience or education in reviewing numbers and reports. If you are a Board Member though, it is your fiduciary responsibility to oversee the financial health of your community, making sound and diligent decisions with your homeowner’s money.
This comprehensive guide will explain the top five most important financial reports and their significance, as well as potential areas of concern to watch out for.
As a board member or homeowner, it is your fiduciary responsibility to understand and oversee the financial health of your community. Overseeing the monies of your homeowners, ensuring they are safe and being spent responsibly is extremely important. Regularly reviewing these reports and asking questions can help ensure responsible financial management. Denali Property Management provides these reports monthly and has trained property managers to assist with any inquiries.
Understanding financial reports is crucial for homeowners and board members who oversee community finances. Explore the top five important reports, their meanings, and potential areas of concern with this easy to read checklist:
1. Balance Sheet:
- Provides a comprehensive overview of your association's financial health.
- Shows bank balances, accounts receivable, reserves, and equity growth/loss.
- Watch outs: low operating bank account balances, high accounts receivable, insufficient reserve fund contributions.
2. Accounts Receivable Report:
- Analyze the A/R Aging Summary Report to identify delinquent homeowners.
- Take necessary actions, such as late letters and legal procedures, to collect overdue payments.
3. Bank Reconciliation:
- Reconcile your checking account balance with the bank's records.
- Monitor monies flowing in and out of your accounts.
- Ensure timely payment of invoices by the property management company.
3. Bank Reconciliation:
- Reconcile your checking account balance with the bank's records.
- Monitor monies flowing in and out of your accounts.
- Ensure timely payment of invoices by the property management company.
4. Income Statement:
- Enables tracking of monthly expenses, income, and budget.
- Identify discrepancies and make informed spending decisions.
- Understand the difference between cash basis and accrual basis accounting.
5 Capital Reserve Plan:
- Review annually to plan for future capital projects.
- Vital for maintaining property value and securing insurance rates.
Read on for a more in depth explanation, and contact our offices with any questions you may have about your financial reports and money management.