Greetings and thank you in advance for your assistance. I know there are some HOA Setup posts out there, and I've reviewed them, but I just want to ensure this unique situation is done correctly! So, apologies for any perceived redundancy, but i promise, it's unique! I'm setting up the books for a 96 unit HOA in QBO. Ultimately, I'm seeking advice on the best way to map this out, customize it, etc. to ensure this is done correctly. There's a current treasurer keeping the books by hand and I'm being brought in to wave the digital wand and convert the masses! Thus far, I've setup the following:Entered the Property Addresses as CustomersAdded the Resident Information as Sub-Customers to the associated property NOW...here's the business they will be conducting and how they're conducting it...They will collect monthly dues from each resident. The details are fuzzy here, but I believe that the residents can pay in the following ways:Send a Check which is then processed by the TreasurerSend a check/pay directly to the bank with a coupon. Theoretically, I will be able to connect to the bank to check the #'s and use it for QBs transactions.The amount owed each month is the same for each resident (i.e. $100 X 12)They don't have huge capital expenditures...they pay out to vendors for Lawn care, Cable, etc. usually on a monthly basis.They want to be able to track income from dues against expected payments resident by resident WHAT I WANT CLARITY ONGiven this relatively easy and simple flow of $$, what is the best way to set up COAs? Money comes in from Dues, over to savings, then out to vendors.Keep in mind, we want to show that $xx.xx came from Y resident and their balance is zero (?) or something like that. Initially, I think I set this up as a recurring PLEDGE?How then does the mula come in, get credited to the right resident and then into savings for spending on vendors after???Do I then set up recurring Pledges? Or, invoices?Can I link the bank to then complete the above referenced action of correctly mapping to a resident account, and then into the gen fund. THANK YOU ALL AGAIN for any assistance you can provide!

Question

HOA Setup

Forum|Forum|2 years ago
June 29, 2023
1 reply
7 views

Greetings and thank you in advance for your assistance. I know there are some HOA Setup posts out there, and I've reviewed them, but I just want to ensure this unique situation is done correctly! So, apologies for any perceived redundancy, but i promise, it's unique!

I'm setting up the books for a 96 unit HOA in QBO. Ultimately, I'm seeking advice on the best way to map this out, customize it, etc. to ensure this is done correctly. There's a current treasurer keeping the books by hand and I'm being brought in to wave the digital wand and convert the masses!

Thus far, I've setup the following:

Entered the Property Addresses as Customers
Added the Resident Information as Sub-Customers to the associated property

NOW...here's the business they will be conducting and how they're conducting it...

They will collect monthly dues from each resident. The details are fuzzy here, but I believe that the residents can pay in the following ways:
- Send a Check which is then processed by the Treasurer
- Send a check/pay directly to the bank with a coupon. Theoretically, I will be able to connect to the bank to check the #'s and use it for QBs transactions.
The amount owed each month is the same for each resident (i.e. $100 X 12)
They don't have huge capital expenditures...they pay out to vendors for Lawn care, Cable, etc. usually on a monthly basis.
They want to be able to track income from dues against expected payments resident by resident

WHAT I WANT CLARITY ON

Given this relatively easy and simple flow of $$, what is the best way to set up COAs? Money comes in from Dues, over to savings, then out to vendors.
- Keep in mind, we want to show that $xx.xx came from Y resident and their balance is zero (?) or something like that.
  - Initially, I think I set this up as a recurring PLEDGE?
  - How then does the mula come in, get credited to the right resident and then into savings for spending on vendors after???
Do I then set up recurring Pledges? Or, invoices?
Can I link the bank to then complete the above referenced action of correctly mapping to a resident account, and then into the gen fund.

THANK YOU ALL AGAIN for any assistance you can provide!

QuickBooks Online

A

Archie_B

Level 6

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.

B

bneaterAuthor

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

B

bneaterAuthor

@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:

	Debit	Credit
Reserve Expense	$5,000
Sidewalk Reserve (Equity)		$1,000
Sealcoating (Equity)		$1,000
Roof Replacement (Equity)		$3,000

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

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