HOA Setup

Hi there, bneater. I appreciate the effort in sharing those details. I'll explain how property management works in QuickBooks Online.

In QuickBooks Online, you have two options for recording income from residents or property owners. It depends on when you receive your payment. You can either record it as an Invoice if you expect to receive payments later or as a Sales receipt if you receive their payments right away.

In your case, what you initially set up as customers and sub-customers is correct. However, keeping track of transactions and using the correct account for property management can be tricky.

Thus, I recommend consulting an accountant for guidance if you're not sure what accounts to use, or how to track these types of transactions. If you don't have an accountant, we can help you find one in you: Find a ProAdvisor.

You can also use the information in this article as a reference:: Record transactions for a property management company. Although the steps in this article are specific to QuickBooks Desktop, you can use them to guide you in recording transactions for rental property and property management.

Let me know if you have any additional concerns or questions about customers or invoices. I'll be here to assist.

Thanks Archie - It's good to know that I'll have support through the process. The only thing I'll add is that there is a treasurer - with what I have to believe is knowledge of accountancy given his prediliction for keeping the books by hand on a physical ledger. So, I anticipate there being an intentionality to the existent bookkeeping - I just want to think about what a typical setup would look llike in anticipation of what is either going to be shared or turned over to me. 

Keep in mind that there is some resistance to this switch over, but the project is being mandated by the Association Board. So, putting the political discussion aside, I just seek information such that I can be ready to work with whatever exists and build confidence in this transition throughout the process - because ultimately, it is he that will inherit these books! 

To piggy back off your reply - the Dues are received asynchronously. That is, residents are submitting their dues for 7/1 throughout the month of June - sending it to the bank, sending it to the treasurer, carrier pigeon - i don't know. But, suffice to say that throughout the month of June, money continually comes in for the July 1 due date. And then, when we get to 7/1, we Groundhog Day it and start doing the same for 8/1. Having said THAT, we all know that there will be residents who have paid 6 months in advance and some residents who will pay late. That's life. 

So, is the set up as a PLEDGE correct? And then, when we process the payment - are we sending a receipt because we're processing it at that time, whatever that time is??? And, what is happening behind the scenese in the journal, re: money flowing to accounts. 

Thanks again!

BN

Hi there. Thanks for getting back to this thread.

You are right. You can set up and record the transaction as a pledge or invoice. Let me show you how: 

1. Select + New and choose Invoice.
2. Click Add Customer and choose a customer from the ▼ dropdown. 
3. Review the Invoice date, Due date, and Terms. 
4. Select Add product or service and select a product or service from the ▼ dropdown.
5. Choose how you want to calculate the charge amount.
6. Once done, save the transaction. 

Once finished, ensure you maintain a record of its payments in QuickBooks Online. Refer to the instructions provided in this article for a comprehensive guide: Record invoice payments.

In addition, to gain insight into the activities occurring within your journal, you can access reports such as Profit and Loss, which provide a comprehensive overview. 

In case you need to revisit the process at a later time, you can use the following instructions to initiate a fund transfer from your undeposited funds account to your liability account, ensuring the payment of your loan: Transfer Funds Between Accounts.

Please inform me if you encounter any additional concerns regarding the setup of HOA in QuickBooks. I am available to assist you at any time. Stay safe!

Excellent - I'm meeting with the Assoc. on Wed so I want to make sure everything is red to go. 

Than kyou for the info in your reply. To the degree possible, we want to automate as much of this as possible. 

Should I set up monthly recurring pledges to be due on the 1st of the month? 

Then, if I connect their bank account, can I set up rules that automatically a) deposit the funds into the proper account in QBs and b) deplete the associated pledge?

Lets say there are two methods of dues payment

1) Resident sends $ to bank and we get daily report of deposits associated to coupon

2) Resident sends check to Treasurer to be deposited by Association

In terms of the double entry - what's going on under the hood there? 

More appropriately, what is decreasing when money goes into checking or undeposited funds? Right, so, method 1) Money is + into checking. 

Method 2) money is + into undeposited funds, then + into checking/- undeposited funds

Then for both : - from checking/ + into A/P for vendor bills, etc.

Is my thinking correct here?

bN

Good to see you back, bneater.

You can utilize the Recurring transaction feature. This way, your residents can receive Pledges/Invoices monthly automatically.

As to receiving payments, you can use the Receive Payment feature when residents send a check to Treasurer. Then, record a deposit to the bank account where the payment will be deposited. Once done, you can match the downloaded deposit transaction to the manually created one.

If your residents deposit the payment automatically to your bank account, all you have to do is to add the transaction from the Banking page.

For more details on receiving payments and handling bank transactions, see these articles:

• Record invoice payments in QuickBooks Online
• Categorize and match online bank transactions in QuickBooks Online

As for your concern about double entry, can you add more details about this? I want to ensure we're on the same page. Any extra information is much appreciated.

In the meantime, let me share some resources that you can browse and use as a reference in managing and navigating around your QuickBooks US account.

• Video Tutorials for QuickBooks Online - You can watch videos that can help you perform the most vital features of the program. 
• Small Business Webinars and Trainings - Join our live QuickBooks webinars for more in-depth knowledge on how you can maximize the use of QuickBooks to manage your finances.

If there's anything else you need help with, please let me know by commenting below. I'm always here to answer any questions you may have. Take care.

Many thanks - wonderful info, and I've checkout out all the resources...thank you

In re: double entry comment - I guess, it's been so engrained that for every + there is a -, I'm searching for where the balance is in all these transactions. So, if we receive a check for dues, that is + to undeposited funds, but where's the balancing transaction??

When the check gets deposited, it goes from (-) undep. funds to (+) A/P or General fund, etc. 

Related - should each property have an account in the Chart of Accounts? Or, would that make it too complicated? (remember each property is a customer and each owner is a sub-customer of the property, and I believe that I will be setting recurring pledges for their dues on the first of each month). 

My concern is accuracy and assignment via the methods by which the money is being received. I will be syncing transactions from the bank account where residents can mail their payment. 

So, that report will lack granularity, but I will receive this:

1. $150 received into checking with coupon 123456

2. $150 received into checking with coupon  777888

3. $300 received into checking with coupon  999000

I want to be able to simultaneously associate that deposit to the customer's pledges to ensure that is accurate and then ensure the $$ is available to pay bills. 

Assuming that coupon 123456 is associated to Property 1 &

777888 is associated to Property 2, 999000 associated to Property 3

How can I ensure that 150 for July is assigned to 1, 150 for July to 2, and 150 for July/150 for Aud to 3?

Does $600 go into checking, then (-)$600 from checking and (+) 150 to Prop 1, (+)150 to Prop 2, and (+) 150+150 to Prop 3....

followed by 

(-)150 from Prop 1, (-) 150 from Prop 2, (-) 300 from Prop 3, and (+) 600 to General Fund or A/P?

I think that's too much, but I just want to be sure. Here's what I think/hope the solution is to the above and below question:

The recurring pledges create an amount in A/R. Money received via bank statement (resident sent in) is (-) A/R and (+) checking, and money received via check to the Treasurer is (-) A/R and (+) undeposited funds, followed by (-) undeposited funds and (+) checking when those checks are deposited. And, hopefully the process of recording the checks from the bank and receiving the checks into undep. funds will have a mechanism to satisfy the monthly pledges/dues for each resident sub-customer account. 

Am I on the right trail here? THANKS! BN

@bneater 

The recurring pledges create an amount in A/R. Money received via bank statement (resident sent in) is (-) A/R and (+) checking, and money received via check to the Treasurer is (-) A/R and (+) undeposited funds, followed by (-) undeposited funds and (+) checking when those checks are deposited. And, hopefully the process of recording the checks from the bank and receiving the checks into undep. funds will have a mechanism to satisfy the monthly pledges/dues for each resident sub-customer account.

Am I on the right trail here?

Pledges create a debit (increase) to A/R and a corresponding credit (increase) to income.  Payments on pledges physically received by the treasurer, debit (increase) undeposited funds, and credit (decrease) A/R.  When the undeposited funds are actually deposited, undeposited funds is credited (decreased) and the bank account is debited (increased).  Electronic payments made on pledges bypass undeposited funds when you match the transaction via bank feeds.  Payments made by check are recorded manually and attached to the resident's account at that point so the movement from UF to the checking account has no affect on the payments being attached to their account.  Electronic payments must be matched accurately via bank feeds to be attached to the resident's account.  There's a chance for errors in the bank feeds matching process if all of the pledges and most deposits are the same amounts.

One other note:

If residents make prepayments of their dues, you will need to make sure they are assigned accurately to their account.  Standard accounting rules dictate that you should record the prepayments as a debit (increase) to your bank account and an increase (credit) to a liability account.  HOWEVER, in order for QBO to show a credit for a prepayment on their account, these prepayments will show as an increase (debit) to the bank account and a decrease (debit) to A/R.  A/R is how QBO attaches payments to customers. Therefore, prepayments show as a reduction (credit) to A/R, not an increase (credit) to a liability account.  Both are credits from a double-entry accounting perspective so it works, but it throws off dyed-in-the-wool accountants sometimes.        

First-  thank you, from the bottom of my heart for the great info. It has been invaluable. In the interest of continuing this discussion and establishing a great guide for future folks in this position (in addition to the wonderful resources noted already)...

I've attached our COA - thus far.

if I've interpreted correctly - when money comes in via bank (C- A/R, D+ 105 Checking), or in Person (C- A/R, D+ 101 UF). When money goes to bank (C- UF, D+ 105 Checking).

Now, from 105 Checking - to pay bills - what should happen. The structure exists from when a management company had their books, so I dunno how much of this is necessary. But, should the money move to Equity Accounts, or to Expenditures, based on bills?

SECOND QUESTION - This is a QBs specific. If I want to set up Recurring Transaction Pledges for all residents each month...should it be a recurring transaction or batch pledge? It's actually remarkably simple, 96 residents, each one due on the first, for $162. In Recurring transactions, it looks like it's just a template.

How can I quickly make a template that is applicable to all 96 properties...AND, let's say I need to adjust the amount to $168 in two years - NOT have to do it 96 times. 

THANKS!

@bneater 

if I've interpreted correctly - when money comes in via bank (C- A/R, D+ 105 Checking), or in Person (C- A/R, D+ 101 UF). When money goes to bank (C- UF, D+ 105 Checking). 

Correct.

But, should the money move to Equity Accounts, or to Expenditures, based on bills? 

The income account assigned to the Product/Service on the resident's recurring monthly pledge (invoice) determines where the dues are recorded when billed (if accrual basis) or paid (if cash basis).  The Category assigned to the bill determines the expense account.  The receipt of payments on pledges and the issuing of payments for bills does not determine the income or expense account, that is the function of pledges and bills.  On the COA that you attached, all of those equity accounts (like street resealing) appear to be for long-term fund reserves.  IMO, you want to assign all of the monthly dues to your revenue account and then move the appropriate amount of funds to those reserve accounts per your HOA's agreement for reserve funding.  That way, all 96 pledges are recorded solely as revenue which makes them much easier to edit when dues increase. 

.should it be a recurring transaction or batch pledge? It's actually remarkably simple, 96 residents, each one due on the first, for $162. In Recurring transactions, it looks like it's just a template.  How can I quickly make a template that is applicable to all 96 properties...AND, let's say I need to adjust the amount to $168 in two years - NOT have to do it 96 times.

There are plusses and minuses to both IMO.  A recurring transaction automates the sending of the pledges but you will need to update all 96 recurring transactions when dues increase.  Batch transactions cannot be recurring (as far as I know) so you will need to select all 96 residents each month when you send out the batch.  However, you will only need to update one pledge when dues increase.  Also, I believe batch transactions can only be done in QBO Advanced

WooHoo - I think it's comin together! Thank you so much @Rainflurry 

To ensure comprehension and instill confidence...

1) ...and continue the exercise...Funds would move from (105) Checking  to (405) Dues Revenue as part oif the process assigning "credit" to the Customer Account. However, in thinking about where the funds are coming from and going to...am I right in thinking this is CREDIT (105) Checking and CREDIT (405) Dues Revenue because we're decreasing the asset account and increasing the revenue account??\

1A) And, from (405) Dues Revenue, the money is then parsed into the appropriate Equity or Expenditure account? And, is that Debit Revenue, Credit Equity/Debit Expenditure?

I think I tied myself up in there!

1B) In reviewing past reports by the management company, it looks like there are 700/800 level accounts specifically for disbursements. Is this something that Qb's creates when writing checks, or is this something that I have to be more intentional about?

2) C'mon Quickbooks - can't we make a RECURRING BATCH TEMPLATE?!?!?! Right now, I have them in Advanced, but I anticipate that they will maintain at PLUS, so, I should stay away from Batching, I guess...and say sayonara to 96 instances of time anytime I have to do an update of anything! 

Thanks Again!

bill N

...I'm going to partially answer my own #2 - When I add "Monthly HOA Dues" as a Product Service that is used on each pledge - when and if I need to change the amount due, changing it there will adjust the price in the recurring transaction. 

This does NOT reduce my need to enter 96 independent duplicate recurring transactions, so, it's not a complete sigh of relief, but, future-me is at least thankful for this!

bN

@bneater 

1) ...and continue the exercise...Funds would move from (105) Checking to (405) Dues Revenue as part oif the process assigning "credit" to the Customer Account. However, in thinking about where the funds are coming from and going to...am I right in thinking this is CREDIT (105) Checking and CREDIT (405) Dues Revenue because we're decreasing the asset account and increasing the revenue account??\

1A) And, from (405) Dues Revenue, the money is then parsed into the appropriate Equity or Expenditure account? And, is that Debit Revenue, Credit Equity/Debit Expenditure?

Not exactly.  It depends on whether you're HOA is on the cash or accrual basis method of accounting.  In double-entry accounting, every transaction affects two accounts (a debit and a credit).  On accrual basis, when you create an invoice (pledge), you are debiting (increasing) accounts receivable (A/R) and crediting (increasing) Dues Revenue - assuming that's the income account assigned to the Product/Service.  Then, when you receive payment on the invoice, you are crediting (decreasing A/R) and debiting (increasing) cash. 

If you're on cash basis, nothing hits A/R.  Dues Revenue is credited (increased) and cash is debited (increased) only when payment is received, not when the invoice is issued.

Avoid using the term "expenditure" if you really mean expense.  They are not the same thing.  An expenditure is simply spending money but that is not the same as incurring an expense.  You have an "expenditure" when you buy an asset, but buying an asset is not an expense.  Expenses are booked when you enter a bill (accrual basis) or when the bill is paid (cash basis).

Funds can be moved to the appropriate equity account for funding reserve replacements per your governing docs and that is a debit (increase) to reserve expense (not Dues revenue) and a credit to the appropriate equity account.  For example, if you have a monthly reserve contribution of $5K, the journal entry might look something like this:

You don't have to have separate equity accounts for each reserve item.  You can just have one lump sum for Replacement Reserves and track it outside of QB.  That's up to your HOA. 

Thanks @Rainflurry - Just a couple questions to clarify.

They are on accrual basis, and there is particular attention to ensuring that pledges are properly matched to accounts (understandably) - so, the A/R process works for this situation. 

When you say, "Cash" ( Then, when you receive payment on the invoice, you are crediting (decreasing A/R) and debiting (increasing) cash. ), what account or category would that be? In my head the processing of the payment is what moves it into and out of A/R, and then I would want to move it to either a general 30000 level (equity) or 40000 (revenue) account, THEN, move it around based on the budget/bills.

Thank you for the clarification re: expenses vs. expenditures - I think I was defaulting back to the Quickbooks terminology for those accounts, calling them "expenditure" accounts. 

I'm of the belief that the Assoc. would want to track these internally in QBooks - in general, they have fixed expenses in that they pay weekly landscaping, pest control on a monthly basis. Of course, there are incidental additions / differences to the vendors, but most of it is scheduled. Part of what I'm doing is marrying the old-old books, with the current books to be the new books - so, I'm trying to figure out what was going on under the hood when they were managed by a management company, then moved to paper books with a stubborn treasurer, and now - this. So, the 300/600 level accounts is a continuation of the legacy processes. 

Is it wrong to think of the equity accounts as "holding accounts" during the month or for longer term expenses, say things that are only billed once a quarter, or less frequently, etc. AND THEN move the money to the 600 level Expen(se)diture account when the bill is to be paid?

As always, many thanks!

bN

@bneater 

"When you say, "Cash" ( Then, when you receive payment on the invoice, you are crediting (decreasing A/R) and debiting (increasing) cash. ), what account or category would that be? In my head the processing of the payment is what moves it into and out of A/R, and then I would want to move it to either a general 30000 level (equity) or 40000 (revenue) account, THEN, move it around based on the budget/bills."

"Cash" is the accountant's term for any bank account or undeposited funds (UF).  It's easier than specifying checking or UF as each client does their books differently, and it's how we learned it in school.  To be clear, you aren't moving payments around.  You are making what's known as "adjusting journal entries" (AJEs) when you make an entry that books the reserve expense and the corresponding entry to equity for long-term replacement reserves.  Otherwise, you are just entering bills for the weekly or monthly services and paying them when due.

"Is it wrong to think of the equity accounts as "holding accounts" during the month or for longer term expenses, say things that are only billed once a quarter, or less frequently, etc. AND THEN move the money to the 600 level Expen(se)diture account when the bill is to be paid?"

Equity accounts are holding accounts for long-term replacement reserves for the HOA but not for weekly, monthly, or quarterly recurring expenses.  These equity accounts are for the common elements that the HOA is responsible to replace based on the HOAs governing documents - siding, roofs, driveways, roads, pool, etc.  However, it is not for grass cutting, pest control, snow removal, etc.   The state I live in requires adequate funding for replacement reserves so that future HOA residents don't get surprised by a massive assessment to cover roofs that should have started being funded from day one.  Your state may be different.  The funding of the equity accounts should be based on the HOA Board's budget.  

Just so you know you're not listening to a complete rookie, I should mention that I was an HOA treasurer for a couple of different HOAs (both of which I transitioned to QB from pen-and-paper) and was a corporate controller for many years so I know just enough to be dangerous;-).    

Perfect - thank you, again @Rainflurry I'm going to have to cut you in on the job at this point! 

We're in Florida - so, let your mind run wild in re: regulations. As a implant to the state, it is the most hands-off, yet over-regulated, and over-bureaucratized state that claims to be anti-red-tape. At least in the Northeast, they didn't hide behind a facade of small-government - they are big, political, and costly - and they let ya know it. I admire that these days!

I get that when we talk about "moving money around" the AJE's really have the money just sitting in the same place....we're just moving it around digitally/mentally - like, bookkeeping Jedi. I've just been so programmed on the double-entry and the monthly cycle that I want to ensure we know what money is where at different times of the month. So, for example, since the dues can come in via Checking (directly) or U/F's (manually) to Checking I wanted to treat the Quickbooks Checking account as a clearing house, meant to properly credit the customer account, and then move into the General Fund to be apportioned to the Equity/Expense account as dictated by the budget. 

This way, if there is money in the "checking" - they will know that it needs to be processed. I guess, that's where I'm going with this...is to ensure that when the setup is complete and they take the books into mostly their control, that there are clear processes set up for them to accomplish their tasks of ensuring member account fidelity, paying their bills, and keeping their books reconciled on the monthly basis. 

I'm in agreement with your assessment of the Equity/Expense account structure - and I believe it jives with their bylaws. The Management company that was there previously wasn't as clear with defining their accounts in that manner, but this is our chance to fix that and ensure that the equity accounts represent long-term reserves, and the Expense accounts are gears for the monthly bills, etc. We have a meeting scheduled to review all of their vendors/expenses to properly categorize!

THANKS MUCH!