By Russell Munz, Community Financials
This article expands on the 2024 Insurance and Ethics issue article about the pros and cons of outsourcing in community management. It explores new trends and offers practical advice on how communities can benefit from outsourcing various functions.
Overview of Outsourcing in Community Management
Outsourcing has been a common practice for communities, involving specialized services such as Reserve Studies, Insurance, Legal Counsel, Structural Engineering, Construction Project Management, and Tax and Audit work. Communities have also outsourced tasks like mailing and payroll. Recently, there’s been a shift towards outsourcing additional functions to streamline operations and manage costs effectively.
Emerging Trends
1. Monthly Accounting
Self-managed boards are increasingly hiring external accountants for monthly dues collections, bill payments, and financial reporting. This approach reduces the workload on volunteer board members and can make the Treasurer’s position more appealing. Outsourcing accounting can lower fixed costs, provide backup staff for continuity, and improve system efficiency. Some boards are even separating accounting from managerial roles for better checks and balances or choosing to outsource accounting to avoid the need for in-house staff.
2. Software and Systems as Part of Outsourcing
Modern software solutions are also part of the outsourcing trend. Tools like AP automation and bank lockbox check scanning help automate payment collections and streamline data management. These systems can be integrated into comprehensive community management software, reducing manual data entry and minimizing errors. This integration improves overall efficiency and saves time.
Outsourcing election services can alleviate the stress of handling elections for volunteers and managers. Services that manage online and paper voting, along with meeting support, help ensure a smooth electoral process.
Communities that are self-managed may outsource resale and refinance paperwork to reduce the risk of delays or errors, which could otherwise jeopardize sales. This also saves valuable volunteer time.
Minute-taking is another task often outsourced to allow board members and managers to concentrate on more critical meeting activities. Specialized services ensure accurate and efficient documentation.
3. Additional Outsourcing Areas
Elections
Resale and Refinance Paperwork
Meeting Minutes
Legal Considerations
When outsourcing, it’s crucial to address several legal aspects. Contracts with service providers should clearly outline the scope of services, responsibilities, and liabilities. Include performance metrics and dispute resolution procedures to manage expectations and address issues effectively. Data protection and privacy are also essential, especially when handling sensitive information. Ensure compliance with relevant data protection laws and implement measures to safeguard community data.
Cost-Benefit Analysis
A financial analysis can help communities evaluate the costs versus benefits of outsourcing. Compare the expenses of maintaining in-house management versus outsourcing to identify potential savings and improvements. This analysis can provide a clearer picture of how outsourcing might impact your community’s budget and operations.
Best Practices
To successfully implement outsourcing, select service providers carefully and manage contracts effectively. Regularly monitor the performance of outsourced services to ensure they meet your community’s needs. Establishing clear communication channels with service providers can also help address any issues promptly and maintain service quality.
Potential Challenges
Outsourcing can present challenges, such as ensuring the quality of service and integrating new systems with existing processes. Address these challenges by developing strategies for effective oversight and managing service provider relationships. Additionally, you’ll want to see reviews or references say that communication with the company meets expectations. This will help ensure that outsourcing arrangements align with community goals and expectations.
Future Trends
Stay informed about emerging trends and technologies in outsourcing. Advancements in software and service models can impact community management practices. Understanding these trends can help communities stay competitive and take advantage of new opportunities to enhance their operations.
Evaluating Outsourcing Opportunities
Examine your community’s current practices and assess whether outsourcing could provide benefits. Are you getting the value you expect from current services? Is your board focused on high-value tasks? Research the market, obtain proposals, and consider whether outsourcing could improve efficiency and effectiveness. Taking these steps can help you make informed decisions about outsourcing and optimize your community management strategies.
Russell Munz, CMCA is a licensed CAM in 6 states and founder of Community Financials, a remote monthly accounting service for HOAs and condos nationwide. They provide systems and services to make accounting and operating communities easier. You can learn more about Russell at Community Financials website or LinkedIn.
