Homeowners may not always understand how much work goes on behind the scenes when they receive the association’s assessment. The annual billing process can seem mysterious to many homeowners, who usually receive their bill at the end of the year when money is tight. Seeing assessments increase each year with few visible improvements may lead many to wonder why they’re paying so much.
To avoid any confusion, keep the lines of communication open between your board and homeowners on this hot-button issue. As an HOA board member, it’s important to be prepared to answer questions about annual billing and explain the process that results in the assessment for your HOA’s annual bill. We hope the run-down of the annual billing process below helps!
Defining Annual Billing
Annual billing is the process by which homeowners are billed for the upkeep of their community’s common areas and property. Multiple parties are involved in the process long before a bill ever reaches the homeowner. The board has the important task of ensuring that homeowners receive bills in a timely manner and that these bills reflect a correct and fair sum. Association management companies like SpectrumAM can play a key role in streamlining this process for HOAs and taking some of the burden off your board.
Step One: Set the Budget
The annual billing process officially begins in the third and fourth quarters of the previous year, when the board meets to set the budget for the coming year. The board must approve all expenditures, including any assessment increase or decrease. When budgeting, boards should be mindful of any anticipated changes in the cost of landscaping, amenity maintenance, insurance, and administrative fees. Additionally, the budget must account for capital improvements and the amount needed for the reserve fund, which will help prepare the HOA for any unexpected costs.
Having a professional community manager available helps ensure that boards consider all potential future expenses. Keeping the lines of communication between all parties open helps prevent homeowners from being hit with unexpected special assessments—they will know about important, upcoming expenses long before they receive the bill. Additionally, while special assessments are sometimes necessary, having a solid financial plan helps alleviate the special assessment costs when they do arise.
Step Two: Select the Payment Schedule
During the budgeting meeting, the board also determines whether homeowners will be expected to pay annually, semi-annually, quarterly, or monthly. While an association’s payment schedule usually remains the same from one year to the next, boards reserve the right to change the schedule. A board’s most important goal is to keep the association financially stable. Boards may realize —especially if there is a large percentage of homeowners who are not paying their assessments in a timely manner— that changing from an annual payment schedule to a quarterly payment schedule may increase both homeowner compliance and keep the association solvent.
Step Three: Mail the Bills
Once all the budget and assessment information has been verified, the board (or management company) will input the data, account for any special promotions or discounts, and mail the bills to homeowners, usually 35 to 60 days before the bill is due. This allows homeowners time to make the necessary provisions for payment.
Explaining to homeowners how annual billing works helps shed light on the entire process and may clear up any lingering questions homeowners may have regarding the necessity of an assessment increase. Annual billing is a tricky process—your homeowners might even be impressed at how much work your board does to balance its books!
