CAI-NJ May 2019 (w)

Interim Monthly Financial Statements — Some Useful Tips By Samuel E. Schneider, CPA, Financial Controller, RCP Management Company, AAMC, AMO

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W hen you receive your community’s interim monthly financial statements do you ask yourself, “What in this financial package can help me better understand the association’s current financial situation?” After reading this, you will have a better idea of some items to look for and a better idea what they mean. Cash Flow As the old saying goes “Cash is King”, and we all know how important cash is in running the day to day operations of an association. So when looking at your operating cash balance on the association’s balance sheet, how do you know if the balance is healthy or not? One important item to compare it to is the balance in accounts payable. The accounts payable balance, listed in the liabilities section of the balance sheet, represents the amounts owed to the association’s vendors. Comparing operating cash and accounts payable balances will give an idea of whether

the association is paying its vendors timely, as well as paying itself in order to properly contribute to its capital reserves, and any other funds, such as the deferred main- tenance fund. If the operating cash balance is greater than the accounts payable balance, the association is most likely able to pay its vendors, as well as its non-operating fund contributions, in a timely fashion. Interfund Balances Often times, interfund balances exist on an association’s financials. An interfund exists when one fund owes money to another fund, e.g., when the operating account owes the capital reserves fund. Two ways interfund balances can arise are when one fund’s cash account temporarily pays for another fund’s expense, or when negative cash flow prevents the budgeted contributions to be paid to another fund. It is important to settle these interfund bal- ances whenever possible. Failing to address interfund bal- CONT I NU E S ON PAGE 22

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