25 May 2011

3 Things You Must Know About Cash Flow

Posted by Orlando HOA Services

The first thing you need to know is that as of 2008, through the Davis-Stirling Act, the State of California has considerably tightened the rules regarding Condominium Financial Management.

It continues to publish new standards yearly. Make sure you keep up with these rules. For excellent and up-to-date information on the latest developments to the Davis-Stirling Act, go to http://www.davis-stirling.com.

Let’s start with Cash Flow. A Homeowner Association has 2 primary accounts: Operating and Reserve. Operating is the account you use to receive any payments and pay your operating bills such as utilities, license fees, landscaping, maintenance, etc. By law, all of your income flows first into your Operating Account.

Reserve is the money you put aside for future repairs and replacement of common property. A Reserve Study is prepared, and from that study you decide how much money should flow from Operating to Reserves on a monthly basis.

Because of the need to move money in this specific way, 2 budgets are generated every year. You guessed it: Operating and Reserve Budgets.

All about budgets next time.

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