Services
Strata Financial Management
One of the core functions of an Owners Corporation is to manage owner’s funds.
An Owners Corporation is responsible for a number of tasks when it comes to financial management which includes:
- levy and collect fees from owners
- hold funds in a named bank account
- pay bills as they fall due
- account for the financial activity each year
- arrange for BAS, GST & TAX returns to be lodged
- prepare financials for an Annual General Meeting
Financial management is often seen by the industry as simply preparing a set of financial statements at the end of the year and a budget for the following year. These documents are then submitted for presentation and adoption at the Annual General Meeting (AGM). The AGM may also be up to 4 or 5 months after the end of the year, meaning the budget is historic as 2 or 3 levies have already been issued based on the previous year’s figures. Consequently, any budget that is approved requires adjusted levies to meet the whole year’s requirement over the last 2 levies of the year. If there are significant changes in the budget, then those catch–up levies can be difficult to meet for some owners.
A number of Owners Corporation Management companies do not employ a finance team and instead, outsource this work to organisations that merely process the numbers. This environment creates a divide between the Owners Corporation Managers and those preparing the financial records, relying solely on the Manager to be financially adequate. In reality, they have no accounting qualifications and use a narrow range of skills to assess requirements or identify risks and problems.
At Horizon we have a dedicated finance and accounting team headed by a qualified Chartered Accountant with over 40 years’ experience. This team also contains a qualified Accountant along with experienced data entry staff. This structure ensures that not only is the data entered and interpreted accurately but further and higher level analysis is applied for your building including cash flow forecasting, impact of debt collection problems, maintenance plan assessment and implementation.
Budgets
At Horizon we seek to have the Owners Corporation Committee form a Finance Sub-Committee to be responsible for continual monitoring of the current financial status of the Owners Corporation, preparation of budgets, approval of invoice payments and assess the impact of major projects against cash reserves or a Maintenance Plan if one is in place.
We see budgets as imperative to determining the requirements ahead of the financial year to seek a better understanding of how future levies will be impacted. In some instances, it means that levies are adjusted at the beginning of the financial year and spread over 4 quarters instead of 2 as is often the case. Of course, the Owners get to confirm the adoption of that budget at the AGM and adjustments can still be made against future contributions if required. A range of financial reports are available through Horizon’s portal, including income vs. expenditure, to enable Committee members to track the financial performance of your building.
Financial Statements
Interim financial statements are available on our portal on a continual cash flowbasis. Detailed statements are prepared for Committee meetings and at year–end. Due to the level of qualification of Horizon staff, you can be assured record keeping and financial statements will be prepared accurately and on a timely basis.
Horizon is experienced at preparing and presenting the required information to allow for the external audit of Financial Statements and even when no audit is required, we use that audit requirement to verify the information in our financial reports.
Long–Term Debt Funding
In some instances, urgent funding is required for a major project that has not been budgeted for or included in a Maintenance Fund. Examples of this may be where Combustible Cladding or major defects are identified for repair. Either of these circumstances can lead to a Council or the Victorian Building Authority issuing a notice whereby the Owners Corporation has to provide evidence that the building is safe to occupy. This is not uncommon in the current environment and results in the building needing substantial urgent funding.
Fortunately, Horizon is experienced in dealing with the practicalities of Cladding and Defect issues, but also has relationships with lenders who specialise in providing long–term funding for such projects.
Cash flow Management
Cash flow management is vitally important for the operation of an Owners Corporation. For example, if an insurance premium is due early in the financial year, it can create problems if that premium is budgeted to be collected over 4 quarters, meaning cash flow can be tight at the time of payment.
Another example is budgeting on the assumption that all Owners will pay on time, which can lead to cash flow shortfalls if there are some delinquent owners not paying their levies. This can be extremely problematic if Owners are located overseas, especially in countries where it is difficult to legally pursue.
At Horizon we are continually monitoring these potential issues and have options for Owners Corporation to consider.
Maintenance Plans
What is a Maintenance Plan? Put simply, it is a further long–term budget, usually spread over 10 to 15 years, based on the maintenance or replacement of major Common Property assets of the Owners Corporation. These include items such as lift replacement, major painting projects, flooring replacements, etc.
Whilst not all Owners Corporations are legally required to implement a Maintenance Plan, we believe it is in the best interests of the Owners to have one prepared for a couple of key reasons.
- Major projects are usually very expensive to carry out and trying to raise the funds by a special levy can leave the Owners Corporation in a difficult position if not all people can pay. It can also raise timing issues due to the delay in levying and collection of those levies.
- Where Owners are selling their Apartments, prospective purchasers will look carefully at their likely exposure if a major project is required soon after they buy, as they become immediately responsible for their share. This leads to some prospective purchasers avoiding the property or resulting in a reduction of the value of the building.
Horizon has access to a number of qualified organisations that specialise in the preparation of Maintenance Plans prepared specifically for your building.
Debt Collection
Ensuring owners pay their levies is an extremely important task. When Owners don’t pay, effectively the remaining Owners have to make up the shortfall. As previously mentioned, sometimes collecting debts can be problematic but we see it essential a timely and coordinated debt collection system is in place. We conduct debt collection activities twice per month and the stages are set out in our Debt Collection Protocol.
These are basic requirements which an Owners Corporation engages a Management company to carry out. Our team is lead by a Chartered Accountant and supported by qualified accounts staff. They handle all of the financial transactions which form part of our compliant accountant practices.
Horizon’s invoicing system gives Committees the ability to review and approve invoices as they fall due. This process can be tailored to your requirements, with as much or as little involvement as you require. Committees also have the ability to run a number of financial reports from the Owners Portal, including viewing past invoices and bank statements.
Our accounting department has been instrumental in developing strategies with budgeting and funding large projects, which has assisted Committee’s in delivering well managed outcomes for their Owners Corporation.
Speak with our team today about how we can assist your Owners Corporation with transparent financial management
