Operating accounts

What Are Operating Accounts?

Operating accounts for homeowner associations (HOAs) are financial accounts specifically used to manage and cover the day-to-day operational expenses of the association. These accounts are crucial for the smooth running of the HOA and include costs related to maintenance, utilities, administrative expenses, and other routine expenditures that the association incurs in the course of its operations.

The Importance of Operating Accounts

Operating accounts are a fundamental aspect of financial management in an HOA. They ensure that funds are available for necessary expenses and that the HOA can fulfill its responsibilities to homeowners. Without a well-managed operating account, an HOA may struggle with financial instability and could fall short in meeting its obligations.

Operating Accounts vs Reserve Accounts

It’s essential to distinguish between operating accounts and reserve accounts. While operating accounts deal with the daily expenses, reserve accounts are set aside for long-term or unexpected expenses, such as major repairs or replacements. Both accounts are vital and should be managed with due diligence for successful financial planning.

Management of Operating Accounts

The management of operating accounts involves budgeting, tracking expenses, regular financial reporting, and sometimes, dealing with special assessments. Good management practices ensure transparency, accountability, and financial stability. HOAs often entrust the management of these accounts to professional HOA management companies or financial advisors.