End of year operating account balance

MichaelT21 (Arkansas)
Posts: 501

Posted:

I'm looking at running down our operating budget to around $0 (-$0 / +$3000) at the end of the year, which is the end of our fiscal year.

Last year we ended up with $50,000 in the operating account at year end which seemed a bit high.

Our operating budget is $252,000 a year.

Any thoughts about ending with $0 in the account at year end?

SheliaH (Indiana)
Posts: 6,964

Posted:

Are we talking about the bank accounts or what's listed on the income/expense report? In theory, you spend exactly as much as you put in, so no one should be upset if the numbers equal zero. That doesn't mean you're broke - you spent exactly what you put in, no more and no less.

If you're talking about the bank account, that's a problem - I prefer having two or three months worth of expenses in the operating account in case something weird happens and the money can be used for that instead of tapping into reserves, getting a loan or that other stuff that makes people go cuckoo for Coco Puffs.

Anything can happen between now and Dec. 31, so I wouldn't worry about it at the moment. Just continue to keep track of the numbers so you'll know what information to give to the homeowners and that the information is complete and accurate.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MichaelT21 (Arkansas)
Posts: 501

Posted:

I'm talking about dropping our bank account balance down to about $0.

Last year we had $75,000 in the bank at year end, so we made a $25,000 shift to reserves and ended up with $50,000 in the operating account. That seemed like too much.

I prefer to have some money in the operating account but we are making a major park renovation that will drop our account balance down. We can rebuild it next year.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By MichaelT21 on 07/26/2022 1:57 PM
I'm talking about dropping our bank account balance down to about $0.

Last year we had $75,000 in the bank at year end, so we made a $25,000 shift to reserves and ended up with $50,000 in the operating account. That seemed like too much.

I prefer to have some money in the operating account but we are making a major park renovation that will drop our account balance down. We can rebuild it next year.

Seriously? What, you will wait until dues are collected to pay bills?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Michael

Why not set up a Playground Expense line item and put the money for it in there?

MichaelT21 (Arkansas)
Posts: 501

Posted:

Quote:

Posted By MaxB4 on 07/26/2022 1:59 PM

Posted By MichaelT21 on 07/26/2022 1:57 PM
I'm talking about dropping our bank account balance down to about $0.

Last year we had $75,000 in the bank at year end, so we made a $25,000 shift to reserves and ended up with $50,000 in the operating account. That seemed like too much.

I prefer to have some money in the operating account but we are making a major park renovation that will drop our account balance down. We can rebuild it next year.

Seriously? What, you will wait until dues are collected to pay bills?

We spent about $12,000 a month. So I'm looking at starting December 1st with $12,000 - $15,000 in the operating. We'll be down at $0 by the end of December. Then on January 1, we get a bunch of money as dues are due on January 1. So the balance will be super low for about 2-3 weeks.

Next year we will slow down our pace of work dramatically because most of the work needed is complete. We can work toward rebuilding our finances then.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By MichaelT21 on 07/26/2022 2:42 PM

Posted By MaxB4 on 07/26/2022 1:59 PM

Posted By MichaelT21 on 07/26/2022 1:57 PM
I'm talking about dropping our bank account balance down to about $0.

Last year we had $75,000 in the bank at year end, so we made a $25,000 shift to reserves and ended up with $50,000 in the operating account. That seemed like too much.

I prefer to have some money in the operating account but we are making a major park renovation that will drop our account balance down. We can rebuild it next year.

Seriously? What, you will wait until dues are collected to pay bills?

We spent about $12,000 a month. So I'm looking at starting December 1st with $12,000 - $15,000 in the operating. We'll be down at $0 by the end of December. Then on January 1, we get a bunch of money as dues are due on January 1. So the balance will be super low for about 2-3 weeks.

Next year we will slow down our pace of work dramatically because most of the work needed is complete. We can work toward rebuilding our finances then.

I would stick to preparing 40 presentations on Powerpoint. Finances is not your strong suit.

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By MichaelT21 on 07/26/2022 1:57 PM
I'm talking about dropping our bank account balance down to about $0.

Last year we had $75,000 in the bank at year end, so we made a $25,000 shift to reserves and ended up with $50,000 in the operating account. That seemed like too much.

I prefer to have some money in the operating account but we are making a major park renovation that will drop our account balance down. We can rebuild it next year.

Okay, you are just trolling us, aren’t you?

LisaB21 (Texas)
Posts: 97

Posted:

you must be kidding. Do you run your checking account down to $0 at home?? Move some to to Capital Reserve fund and if you do not already have a NON Capital Expense fund, create one and move a little in there. Not as many restrictions on what you can use the money for as in a Capital Reserve. IMO your bank balance should have 3-6 months of your operating $'s in it. Just like your household account.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Wrong Lisa. The HOA budget does NOT work like your home budget. They are different. A HOA is funded by all it's members and is a NON-Profit. It is formed as a corporation to be able to collect those funds. A Home budget is NOT a non-profit. You also don't have to collect money from every member to operate. I am sure a two year old is not a contributor to the income of your family.

So he is on the right track of getting as close to "0" as you can. Does not mean you can't have a savings account. Does not have to necessarily have to be a "reserve" account. An savings account for those emergency uses or to fill in the gaps of projects.

If we had any "extra" money, we would look at things like replacing pool furniture or buying plants for front entrance. Putting the money back into the HOA. Not into member's pockets.

Former HOA President

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By MelissaP1 on 07/27/2022 4:27 AM
Wrong Lisa. The HOA budget does NOT work like your home budget. They are different. A HOA is funded by all it's members and is a NON-Profit. It is formed as a corporation to be able to collect those funds. A Home budget is NOT a non-profit. You also don't have to collect money from every member to operate. I am sure a two year old is not a contributor to the income of your family.

So he is on the right track of getting as close to "0" as you can. Does not mean you can't have a savings account. Does not have to necessarily have to be a "reserve" account. An savings account for those emergency uses or to fill in the gaps of projects.

If we had any "extra" money, we would look at things like replacing pool furniture or buying plants for front entrance. Putting the money back into the HOA. Not into member's pockets.

Clueless, Clueless and Clueless

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MichaelT21 on 07/26/2022 1:57 PM

I'm talking about dropping our bank account balance down to about $0.

Providing 0 = contingency buffer + prepaid assessments - delinquent payments + checks that haven't cleared.

However, if you are actually talking about taking the physical account to zero, as many on here think you are talking about, you should do a lot more research before proposing such an idea:

Best Practices Reports from the foundation for community association research

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By TimB4 on 07/27/2022 5:56 AM

Posted By MichaelT21 on 07/26/2022 1:57 PM

I'm talking about dropping our bank account balance down to about $0.

Providing 0 = contingency buffer + prepaid assessments - delinquent payments + checks that haven't cleared.

However, if you are actually talking about taking the physical account to zero, as many on here think you are talking about, you should do a lot more research before proposing such an idea:

Best Practices Reports from the foundation for community association research

He did say they are going to drop "our bank account balance" to zero, so that is pretty clearly talking about the physical account, not a calculated balance sheet line item. Given that an HOA's revenue is evenly divided throughout the year (quarterly, monthly, or whatever) such an idea could only work if expenses are also evenly divided throughout the year. Unless they have no seasonal expenses (snow removal, landscaping, swimming pool, etc.) that would seem to be a disaster in the making. Even with completely even and predictable expenses, it could only work if you are willing to occasionally "play the float" and write checks that won't be covered in your bank account until (hopefully) revenue comes in to cover them.

MichaelT21 (Arkansas)
Posts: 501

Posted:

Yes, I'm talking dropping our operating account to zero or close to it. I think we're committed to doing that this year due to the projects we've done. I think next year we should build that back up, which means doing little in the way of projects.