The Importance of an HOA Statement of Cash Flows There is a multitude of other accounts that can do so as well, including but not limited to prepaid insurance, salaries payable, prepaid assessments, and taxes payable. Of course, AR and AP are not the only two accounts that can affect your HOA cash flow statement. When AP goes down, you are paying your outstanding debts and so money flows out of the HOA. In the same way, a decrease in accounts payable (AP) means a decrease in your cash account. A drop in the AR equates to someone paying what they owe to your association. For instance, if your accounts receivable (AR) decreases, that means that your association received more cash. Obviously, any changes from the balance sheet and income accounts will influence the statement of cash flow. If your association took out a loan and paid it off, that would usually fall under this category. This is cash sourced from banks and investors as well as cash paid to shareholders.
If you invest your reserves, this part of the statement would cover it. Cash flow from investing activities includes changes in assets or equipment as well as anything considered as an investment. For an HOA, that could mean revenue from dues and assessments, interest, fines, salaries and wages, and other operating expenses. This part consists of cash sourced from and spent on business activities. The cash flow statement is a simple financial report that is typically divided into three parts: What Is Included in an HOA Cash Flow Statement? If you want to avoid legal trouble, always check your state laws and governing documents for any financial requirements. Other associations are required to do the same as stipulated by their governing documents. One example of this is Nevada ( NRS 116.31038). In some states, it is even mandatory to prepare financial statements every so often and present them to the membership. The cash flow statement is one of several financial reports that a homeowners association should know about. While the income statement shows income and expenses affecting all accounts, the cash flow statement mainly shows how other accounts impact your cash position.
Many might compare it to an HOA income statement, but there is a stark difference between the two reports. This is where an HOA cash flow statement comes in.Ī cash flow statement is a financial report that depicts the amount of cash and its equivalents moving in and out of an organization - in this case, a homeowners association. Without proper controls and reporting, though, it can be easy to lose track of the association’s cash. Every homeowners association deals with money.
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