Adapting and evolving: How leveraging technology can better serve the communities you manage
When it comes to budgeting, one of the first things looked at are ways to reduce costs. Like any business, an HOA needs money to function fully. For many HOA members, talking about “budget” can sometimes be a touchy subject. No one wants to be the bad guy — the person that tells the holiday committee that the yearly Christmas party has been canceled. Money is emotional, sometimes even scary. For an HOA, the obstacles lay more in how financial decisions will impact the community and the home. HOAs all over the US spend hundreds of thousands of dollars on direct expenses alone. It’s how the HOA manages this money that is most important to the community, especially when it comes to reducing costs.
To help your community through a financial obstacle, we’ve put together a list of:
One of the most significant ways to save on costs is to review and re-negotiate vendor contracts. From landscaping to the office vending machines, HOAs rely on their vendors to provide applicable agreements to meet the HOA’s needs. When going into a new contract year, it’s not unusual for an HOA to be presented with an increase in fees. In this situation, seeking financial advice from your HOA accounting department is an essential part of this method. Why? To renegotiate a new contract.
Below are a few pointers to consider when renegotiating a contract with your vendor.
How many years has your HOA done business with your vendor? Has your vendor ever offered the option to receive a discounted rate for your length of business?
When reviewing your vendor's financial history, check for areas of opportunity with your vendor’s cost vs. profits.
Consider running an audit to check for the last time that your vendor may have offered the HOA a reduction in fees? Or have they continued to raise prices each year?
No vendor wants to lose business. When presented with a less costly rate from a competitive vendor, be sure to do your research before jumping the gun. Your vendor will find every reason for you not to leave them for someone else.
Just ask! Many people fear that being upfront can sometimes be intimidating. In the grand scheme of things, what do you have to lose? If your HOA requires financial help or is trying to reduce cost, briefly explain the situation and be honest. You never know; both parties may walk out with a win-win — you save money for your HOA, and your vendor keeps their client.
Regardless of the size of your community, landscaping tends to be one of the highest-cost line items. On average, a typical community will spend anywhere from $45,000-$60,000 per year on landscaping maintenance. While maintaining the physical appearance of the property area is essential, HOA’s can evaluate landscaping fees to help find areas to reduce costs. A few cost-saving options include:
Rarely, if ever, do insurance premiums get reviewed. When insurance premiums are high-cost, consider renegotiating with your current carrier or shopping around for better, lower-cost alternatives.
Providing perks to your residents is always nice, but consider the HOA’s needs versus wants when the cost is critical. Be sure to prioritize your findings by looking at the situation from a long-term perspective. For example, should your HOA put money toward redecorating the community hall or replacing the AC unit in the community building?
Two key questions to consider:
Having astute knowledge of the community finances will allow you to see gaps and potential areas for reduction. It’s always easy to assume your HOA has money to contribute. In reality, an HOA must think like any business — they have to find areas of opportunity to save and invest in long-term financial solutions. Before taking the giant leap to dig into reports, be sure to advise your financial and accounting committee. Here is where you will have the opportunity to ask questions and learn what areas of cost-saving opportunities would be best to focus on.
A healthy HOA with an abundance of funds should have a continuously funded reserve. While you should not use reserve funds for day-to-day expenses, temporarily reducing reserve fund contributions will alleviate costs until the community is more financially stable. Keep in mind that this method is only recommended for HOAs that are fully funded. Examples of reserve fund contributions could include maintenance costs, extended hours to monitor headcounts at the community pool, or funds for safety and health regulations.
Management companies can provide one singular solution to administrative responsibilities like budgeting, vendor contracts, fee collection, maintenance, and more. By utilizing a distinct source, you can lower the costs of many people doing tasks separately.
If any of your communications are currently being printed and mailed, consider going paperless to reduce costs-efficient and environmentally friendly! Advanced software allows your HOA to reduce additional work by utilizing today's market trends and latest technology, allowing for further savings instead of sending money via hard copy mailers.
Here are a few topics and suggestions to consider when strategizing how to reduce cost within your HOA best.