Moving Financials-Only MC Functions Inhouse

NpS (Pennsylvania)
Posts: 4,216

Posted:

We use a financials only MC. We are thinking about bringing that function in-house (possibly bringing in a PT bookkeeper once or twice a month).

Looking for some feedback on what others in a somewhat similar situation are thinking and doing?

1. Do you use HOA specific software or general accounting software? How expensive?

2. How expensive are lock boxes for payment processing? Does the bank provide you with check numbers or scans of the checks.

3. Are you able to get all records stored online? - including HO files. Is it a big deal or just trendy?

4. Is it important to have a web portal for the accounting software so that HOs can see the status of their account?

5. If we bring in a PT bookkeeper, this will be our first ever employee. Anything we should watch out for?

6. Any advice you can give would be helpful re dos and don'ts.

Sikubali jukumu. Read all posts at your own risk.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

NP

Do not make them an employee. Contract with them on a 1099.

RichardP13 (California)
Posts: 163

Posted:

NpS

1. How many units, Condo or Detached
2. What do you currently pay for Financial Only.

IMHO, this is not a task for the weak at heart. It may be wiser to find a management company that can offer your association may be looking for than starting out on your own.

To answer some of your questions, here goes

1. If you are 50 plus units, go with HOA specific software, not general or Quickbooks.

2. Lockbox arrangements are done by your bank and pricing depends on the amount in the amount. We offer for free because of the amount of deposits for all our associations. If you know what you're doing, this is a great way to handle assessments.

3. Digital records are essential now days, and not that difficult.

4. Some HOA software have websites or web portals, they are handy and many times included in the price of the software.

5. The bookkeeper should be a 1099 contractor, less liability.

6. The dos and don't would fit on this forum.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By RichardP13 on 01/29/2015 12:51 PM
NpS

*** Thanks Richard. Also thanks John.

1. How many units, Condo or Detached

*** 81 townhouses.

2. What do you currently pay for Financial Only.

*** Under %9k.

IMHO, this is not a task for the weak at heart. It may be wiser to find a management company that can offer your association may be looking for than starting out on your own.

*** About to get rid of 3rd MC in 5 years. Tired of it. All had strong front people and weak backroom.

To answer some of your questions, here goes

1. If you are 50 plus units, go with HOA specific software, not general or Quickbooks.

*** Gotcha.

2. Lockbox arrangements are done by your bank and pricing depends on the amount in the amount. We offer for free because of the amount of deposits for all our associations. If you know what you're doing, this is a great way to handle assessments.

*** Prefer not to have anyone within the HOA handling checks.

3. Digital records are essential now days, and not that difficult.

*** I assume that most of the HOA specific software companies are fairly good at this. Or should we make this part of our investigation?

4. Some HOA software have websites or web portals, they are handy and many times included in the price of the software.

*** So far, it's an upcharge with everyone we are talking to. Generally less than $500 per year.

5. The bookkeeper should be a 1099 contractor, less liability.

*** Gotcha.

6. The dos and don't would fit on this forum.

Sikubali jukumu. Read all posts at your own risk.

RichardP13 (California)
Posts: 163

Posted:

Who handles all homeowner information, violations, work orders, collections, late notices?

Homeowner financials are different than regular financials or even corporate financials. I have experiences where CPA's have a difficult time understanding HOA finances.

You might consider outsourcing your financials or bookkeeping to someone who specializes in homeowner associations. You might check with a couple of the larger HOA software companies and ask them for companies that do that using their software.

If you need help with software companies, you can contact me offline at [email protected]

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By RichardP13 on 01/29/2015 2:00 PM
Who handles all homeowner information, violations, work orders, collections, late notices?

Homeowner financials are different than regular financials or even corporate financials. I have experiences where CPA's have a difficult time understanding HOA finances.

You might consider outsourcing your financials or bookkeeping to someone who specializes in homeowner associations. You might check with a couple of the larger HOA software companies and ask them for companies that do that using their software.

If you need help with software companies, you can contact me offline at [email protected]

BOD maintains non-financial records. Rarely do violation notices if at all - have relaxed enforcement substantially on picayune stuff. Work orders not an issue - Units are self maintained other than painting. Collections part of MC responsibility until turnover to attorney - we deal with attorney directly. Late notices s/b part of automated billing system.

Fund accounting is a bit different but we are getting more used to it.

If you don't mind, I will take you up on your email offer in the next few days.

Thx Richard.

Sikubali jukumu. Read all posts at your own risk.

BillH10 (Texas)
Posts: 1,217

Posted:

NpS

I did not understand your response to the question about how much you are paying for financial only now. Is it 9% or $9K?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By BillH10 on 01/29/2015 2:39 PM
NpS

I did not understand your response to the question about how much you are paying for financial only now. Is it 9% or $9K?

$9k.

Sikubali jukumu. Read all posts at your own risk.

RichardP13 (California)
Posts: 163

Posted:

NpS

Door always open.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By NpS on 01/29/2015 9:42 AM
We use a financials only MC. We are thinking about bringing that function in-house (possibly bringing in a PT bookkeeper once or twice a month).

Looking for some feedback on what others in a somewhat similar situation are thinking and doing?
1. Do you use HOA specific software or general accounting software? How expensive?
2. How expensive are lock boxes for payment processing? Does the bank provide you with check numbers or scans of the checks.
3. Are you able to get all records stored online? - including HO files. Is it a big deal or just trendy?
4. Is it important to have a web portal for the accounting software so that HOs can see the status of their account?

Background - 65 homes, self managed since turnover ~16 years ago.
1) We use Quickbooks Pro - around $250.
2) PO box with bank is $90/year, we also have a simple drop box that someone made on one of the directors front porch. Bank has scans available online for both checks we write and for those we deposit.
3) All financials including homeowners (customers) and vendors are in Quickbooks.
4) We don't, I don't recall anyone ever asking for one. We bill quarterly and send emails, some HOs pay annually or semi. Occasionally one will email asking if they owe that quarter, but that's only 3-4 per year.

Escaped former treasurer and director of a self managed association.

TimB4 (Tennessee)
Posts: 21,062

Posted:

We use paper ledgers and deposit checks mailed to a PO Box.

I have been doing the work lately, however, we have utilized an independent contractor for bookkeeping services in the past. We paid them $400 per month and the duties were:

Collect the mail and deliver as appropriate to specific officers/committees
Prepare and make deposits, providing copy of deposit slip to Treasurer
Track payments in accordance with general accounting practices
Prepare a monthly report for the Treasurer on delinquencies
Make initial contact (letter) with members who are late (Treasurer takes over from 2nd notice on)

Keep in mind that as an independent contractor, the Association has zero say on how the payments are tracked (software, paper ledgers, excel spreadsheets, etc.). If the Association specifies how the work is to be done, then the individual is considered an employee and not an independent contractor.

The Treasurer prepared and mailed the checks to pay bills.
The bookkeeper was not on the bank account signature card.

CyrstalB (Maryland)
Posts: 457

Posted:

>>>>>Do you use HOA specific software or general accounting software? How expensive?

2. How expensive are lock boxes for payment processing? Does the bank provide you with check numbers or scans of the checks.

We took up a PO Box for our HOA, Pres sent out the invoices and payments are mailed to the box and all other material. Treasurer made the deposits.

3. Are you able to get all records stored online? - including HO files. Is it a big deal or just trendy?
We have our box of hard copies, as per our Docs, they stay with the Pres. We also initiated a hard copy ledger for all entries regarding HO payments. We have little common area so assessments are the primary. We chose old school for this because I could get some great software to use, but the next board may not be so computer savvy, and since software changes monthly, the cost would rise.

4. Is it important to have a web portal for the accounting software so that HOs can see the status of their account? For our HO's, there is no need for this and I would question the extra expense.

5. If we bring in a PT bookkeeper, this will be our first ever employee. Anything we should watch out for? Employee???? No, why would you hire them? A bookkeeper is a vendor.

6. Any advice you can give would be helpful re dos and don'ts. Best thing we ever did, and at the meetings, we called it a pilot program.

BillH10 (Texas)
Posts: 1,217

Posted:

NpS

Thanks for the clarification regarding the amount you are paying.

Based on my experience, and the size of your association, I think you may be paying too much for financials only unless that amount includes an annual audit and tax services, and other administrative functions such as late notices.

I am not familiar with market rate for accounting services in your area, that could also be a factor.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By BillH10 on 01/30/2015 8:43 AM
Based on my experience, and the size of your association, I think you may be paying too much for financials only unless that amount includes an annual audit and tax services, and other administrative functions such as late notices.

I am not familiar with market rate for accounting services in your area, that could also be a factor.

Financials-only includes mailing of all financial related and handling delinquencies up to the point of turnover to attorney.

Audit and tax return cost us $1,250.

Sikubali jukumu. Read all posts at your own risk.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By TimB4 on 01/29/2015 3:43 PM
Keep in mind that as an independent contractor, the Association has zero say on how the payments are tracked (software, paper ledgers, excel spreadsheets, etc.). If the Association specifies how the work is to be done, then the individual is considered an employee and not an independent contractor.

Tim - I think the distinction between contractor and employee depends on various factors, the most important being:
1. Whether the person provides the same or similar services to others; and
2. Whether the person uses his/her own tools or the tools are provided by the HOA.

Specifying how the work is to be done (excel, ledgers, software) should be the prerogative of the HOA whether the person is an employee or contractor. In your case, you might look for an independent contractor who is proficient in QuickBooks. That alone would not make them an employee.

Sikubali jukumu. Read all posts at your own risk.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

We only had an accountant service. She happened to be a member so she always had the Treasurer position. Which means she was also a board member. Her firm collected our money and processed checks. If we were to write a check to pay anyone, we had a 2 signature system of only approved officers could sign. The accounting firm als having a place to sign when issuing. Those checks were kind of expensive to have made. A few hundred dollars for the ledger system but they did last a few years.

Otherwise, we enforced the rules and issued out warnings. I was the one usually writing the warning letters. Always made sure to reference the rule they were breaking verbatim from our documents. The could appeal at the open board meetings if the did not like it.

We had 107 home owners so the load wasn't that large we could not handle on our own. If you can survive it, I think just hiring an accounting firm would be a good idea.

Former HOA President

NpS (Pennsylvania)
Posts: 4,216

Posted:

Thanks for your thoughts John, Richard, Tim, Crystal, Bill, Douglas, and Melissa

It's on the agenda for BOD discussion tomorrow.

Sikubali jukumu. Read all posts at your own risk.

CyrstalB (Maryland)
Posts: 457

Posted:

Quote:

Posted By NpS on 01/30/2015 10:18 AM

Posted By TimB4 on 01/29/2015 3:43 PM
Keep in mind that as an independent contractor, the Association has zero say on how the payments are tracked (software, paper ledgers, excel spreadsheets, etc.). If the Association specifies how the work is to be done, then the individual is considered an employee and not an independent contractor.

Tim - I think the distinction between contractor and employee depends on various factors, the most important being:
1. Whether the person provides the same or similar services to others; and
2. Whether the person uses his/her own tools or the tools are provided by the HOA.

Specifying how the work is to be done (excel, ledgers, software) should be the prerogative of the HOA whether the person is an employee or contractor. In your case, you might look for an independent contractor who is proficient in QuickBooks. That alone would not make them an employee.

Perhaps I missed something in the replies, but there shouldn't be a discussion on whether a bookkeeper is your employee or your contractor. They would be considered a vendor. YOu hire them to perform a service for you, and there are no tax implications. If you choose to quantify them as a contractor, the HOA will have to issue a 1099 to them which complicates the not for profit.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By CyrstalB on 02/01/2015 5:58 AM

Posted By NpS on 01/30/2015 10:18 AM

Posted By TimB4 on 01/29/2015 3:43 PM
Keep in mind that as an independent contractor, the Association has zero say on how the payments are tracked (software, paper ledgers, excel spreadsheets, etc.). If the Association specifies how the work is to be done, then the individual is considered an employee and not an independent contractor.

Tim - I think the distinction between contractor and employee depends on various factors, the most important being:
1. Whether the person provides the same or similar services to others; and
2. Whether the person uses his/her own tools or the tools are provided by the HOA.

Specifying how the work is to be done (excel, ledgers, software) should be the prerogative of the HOA whether the person is an employee or contractor. In your case, you might look for an independent contractor who is proficient in QuickBooks. That alone would not make them an employee.

Perhaps I missed something in the replies, but there shouldn't be a discussion on whether a bookkeeper is your employee or your contractor. They would be considered a vendor. YOu hire them to perform a service for you, and there are no tax implications. If you choose to quantify them as a contractor, the HOA will have to issue a 1099 to them which complicates the not for profit.

Not that simple Crystal. If all it takes is slapping a label of contractor on someone, then businesses could avoid having any employees by giving that label to everyone. The IRS has criteria that distinguishes an employee from a contractor. It's their definition that counts.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By NpS on 01/30/2015 10:18 AM

Posted By TimB4 on 01/29/2015 3:43 PM
Keep in mind that as an independent contractor, the Association has zero say on how the payments are tracked (software, paper ledgers, excel spreadsheets, etc.). If the Association specifies how the work is to be done, then the individual is considered an employee and not an independent contractor.

Tim - I think the distinction between contractor and employee depends on various factors, the most important being:
1. Whether the person provides the same or similar services to others; and
2. Whether the person uses his/her own tools or the tools are provided by the HOA.

Specifying how the work is to be done (excel, ledgers, software) should be the prerogative of the HOA whether the person is an employee or contractor. In your case, you might look for an independent contractor who is proficient in QuickBooks. That alone would not make them an employee.

I refer you to:

Independent Contractor (Self-Employed) or Employee? IRS website