The review of your corporation’s financial affairs is an intensely important task that must be taken seriously for your community’s success. We recommend monthly reviews of your financials to keep aware of fluctuations such as planned and unplanned expenses and savings for a successful and bright future.
Accrual accounting is the commonly used methodology used which simply means revenue is recorded when it is earned and expenses are recorded for when the services are rendered. With this in mind, below is a guideline you may use to review the income statement:
- Compare line items from actual to their respective budgeted amounts.
- If the monthly expense and budget line item do not match, ensure the accumulative year to date holds and expected to remain.
- Look for trends and patterns and research the cause and effects a little deeper. From these learnings, put a plan in place to react strategically.
- Review your accounts receivable listed on the balance sheet and have a collection process in place. Refer to your bylaws or create a policy so you may react consistently without bias.
- Question expenses that are over, under or don’t show any cost when compared to the budget.
- Review the general or sub ledger for a further breakdown of the expense category.
- Then, follow the expense line item to the monthly bank account statement to confirm payment.
- If unsure, review the actual invoice attached to your package. Otherwise, refer to past minutes or board resolutions where the transaction was approved.
- Review your accounts payable listed on the balance sheet to avoid penalty on overdue accounts and from growing out of control. Refer to your bylaws or create a policy so you may react consistently without bias.
- Review the “Cheque Register” to see what expenses have not yet been paid (your balance sheet will list this as a liability until cashed).
- Be sure that reserve expenses are accurately captured and not as part of the operating account.
- Review the financials in advance of the meeting to keep constructive and moving forward.
- As the corporation is tasked only to “repair and replace” major non-annually occurring common property elements as per the reserve fund study, it may not purchase new assets unless authorized by the owners. With this in mind anticipate changes to drive improvements and efficiencies in the industry such as solar technology for example that may warrant consideration for the overall gains for the community.
- Keep in mind the requirement of fiscal year end third party financial audits or review engagements. Bylaws will state the minimum type of audit your corporation must follow. These will need to be prepared for the owners at the following Annual General Meeting.
Once you have a good pulse on your financial status, this will become the platform to base current and future decisions relative to your corporation’s ultimate goal of sustaining or increasing property values. Use this to assess the management of your assets, marketability, security and operations among other factors.
If you, or someone you know with a background in finance, your board needs you! Such board members are valuable assets as they can assess and analyze the financial state of the corporation and know what questions to ask and how to ask them. Allow these members to take the lead as Treasurer but do keep in mind that the ultimate responsibility lies on the entire board of directors as a collective. Such board members are encouraged to share their review process so other board members may later assist you during the review or in your absence to keep your corporation moving forward. Remember, coaching and mentoring others of various backgrounds further strengthens your expertise and better equips your leadership team!
