HOA accounts payable: As volume increases, so does the need for internal controls

HOA accounts payable is the behind-the-scenes work of receiving, coding, approving, and paying every bill an association owes. Boards rarely watch it happen, yet it protects both the community’s funds and your reputation as an HOA manager.

We spoke to Braedon Hebert, a certified CPA and co-founder of LeapAP, an accounts payable automation platform built for community association managers, to get his expert advice on how to approach accounts payable and set up the right controls to make sure your process stays reliable, even when a community’s needs change.

What We’ll Cover:

• An effective accounts payable workflow and how to set it up, stage by stage
• The internal controls every association needs as volume grows
• When to add dedicated accounts payable automation software

Why HOA Accounts Payable Deserves More Attention than It Gets

Accounts payable is the process of receiving, coding, approving, posting, and paying every bill an association owes. That includes common area utilities, insurance premiums, landscaping and maintenance vendors, and professional services such as legal or accounting support.

Boards see the result of this work, like as a mowed lawn or a paid insurance policy, but they rarely see the review and approval that happens before each payment goes out, which are the real sources of accuracy and trustworthy management.

The stakes rise with the size of the portfolio. According to Hebert, “as volume increases, the need for internal controls increases [to handle] more complicated workflows.” A process that works for one small association starts to strain once you are paying bills across many communities.

Set Up a Reliable HOA Accounts Payable Workflow, Stage by Stage

A consistent workflow keeps payments accurate and gives the board a clear record. Hebert notes that technology plays an important role here to “digitize and automate the receiving, coding, approving, posting, and paying of all the types of invoices.”

Lay the process out once so you can map a control to each step. The four stages below cover the full path a bill travels from arrival to reconciliation.

Stage 1: Receive and Code Invoices

Capture each bill as it arrives, whether a vendor emails it or a utility posts it to an online portal. Then code the bill to the correct association and to the right fund, either operating or reserve, before it moves any further.

Coding errors are hard to catch later, so getting this step right saves hours at month-end close.

For context on how coding ties back to the ledger, see Buildium’s guid on creating a chart of accounts. You can also use Buildium’s AI-backed tools to scan a bill, pull the details, and create a bill ready to review, so entry takes less time and fewer figures get mistyped.

Stage 2: Review and Approve Payments

Every bill needs a review step before anyone schedules payment. Hebert notes that one of the first things to ask when working with an association is whether you “have proper approval controls in place, how are those governed and how are payments being reviewed and approved.”

Set up a clear workflow that addresses these questions, and you have the basis of a reliable review process.

Write down who reviews a bill, who approves it, and at what dollar amount a second approval is required. That record answers a homeowner or auditor question in minutes rather than days.

Stage 3: Pay and Post Status

Once a bill is approved, schedule payment by the due date and post it back to the accounting system against the right association. Many associations still pay by check, and Hebert hears the reasoning often: “we’ve been running the same accounting system for the last 30 years and we pay by checks because it works.”

That may be true up until the point volume climbs and manual check runs slow you down. You don’t want to be left scrambling to change your approach. Instead, set up tools now to handle higher volumes down the road.

For example, you can pay bills through Buildium and have each payment recorded against the correct association without re-keying, so your records stay current as you pay.

Stage 4: Reconcile and Document

Close the loop with a monthly bank reconciliation and a documented trail for each payment. Keep the invoice, the approval, and the payment record together so the full history of any bill is easy to produce.

A clean trail is what lets you answer questions quickly and hand auditors what they need.

For more on monthly financial routines, see Buildium’s HOA accounting best practices.

Internal Controls Your HOA Accounts Payable Process Needs

Controls protect three parties at once. They safeguard the association’s money, the board’s trust, and your reputation as the manager. The four controls below are the ones Hebert returns to most often, each tied to what you gain by having it.

Since laws and regulations around association funds and reporting can vary by jurisdiction, it’s a good idea to consult with a qualified accountant familiar with your state if you’re in doubt.

1. Segregate Duties Across Sourcing, Approval, and Payment

The person who enters a bill should not be the only person who approves and pays it. As Hebert puts it, “the less people who are involved, the less segregation of duties and accountability, and the risk of having the capability of performing fraud is higher.”

Split sourcing, approval, and payment across more than one person whenever staffing allows. On a small team, the board treasurer can serve as the second set of eyes on larger payments, which gives you oversight without adding headcount.

2. Set Approval Thresholds and Dual Authorization

Put approval thresholds in writing so everyone knows the rules. Routine recurring bills such as utilities can follow a standing approval, while any payment above a set dollar amount requires two approvals before it goes out.

System-enforced workflows help most when your team is small. Board members can review and approve bills in Buildium, so you get sign-off without chasing a round of emails, and a time-sensitive bill does not have to wait for the next board meeting.

3. Verify Vendors and Review Contracts

Confirm that each vendor is legitimate and that no board member has an undisclosed stake in the work. Hebert points to volunteer boards as one source of risk, both from honest mistakes and from self-dealing such as bid-rigging on large projects.

Review vendor contracts at least once a year and keep the bidding records for big reserve projects such as roof replacements. This habit guards against the kickback scenarios that are hard to spot once a payment has already cleared.

4. Reconcile and Keep an Audit Trail

Have someone other than the payer reconcile the bank account each month. Pair that with documentation for every payment so nothing relies on one person’s memory.

A well set up accounts payable “[provides] that internal control structure and the comfort to the boards,” says Hebert. “There are system controls in place to prevent fraud from happening.” To help with this, you can also set per-user and per-card spending limits in Buildium, so a single staffer cannot commit funds beyond their authority.

The Risks of a Manual Accounts Payable Process as You Scale

A manual, check-based process hides its weaknesses until increase payment volume exposes them. By then, the damage is done.

Hebert watches for a set of warning signs that an association has outgrown its process:

• Delinquency climbing without a clear reason
• Bills not getting paid quickly enough
• Utility bills still paid by hand instead of set up for recurring payment
• Penalties, late fees, or shut-off notices arriving
• Financial reporting to the board running slow

A cash check belongs in the process too. Before you release a batch of payments, confirm there will be enough funds in the right account to cover them, so you do not overdraw an operating account or dip into reserves by accident.

When to Add Dedicated Accounts Payable Automation Tools

There is a point where adding dedicated accounts payable software pays off in cost and processing time. In Hebert’s experience, that point “usually starts around a few hundred invoices” a month, plus, when the effort of processing bills by hand starts to outweigh the cost of a tool.

Automation gets you time back that you can spend elsewhere. When the system you set up pulls utility bills straight from online portals, you stop logging into each one by hand, which frees you to build a better budget, run a cleaner month-end close, or any other more strategic job.

Buildium’s accounting and payments tools cover core accounts payable, and a marketplace of partner integrations and an open API let dedicated tools such as LeapAP connect to it. This makes it easier to add capacity at higher volume without replacing the system of record your team already knows.

LeapAP can be especially helpful here. It connects to your accounting system and takes an invoice from capture through payment without manual data entry. You can customizable user roles to separate tasks between your team and reference a complete audit trail with duplicate-invoice protection.

Build an HOA Accounts Payable Process That Scales

Accurate accounts payable comes down to a repeatable workflow, controls matched to your invoice volume, and a documented trail the board can see. Get those right and bill-paying stays predictable as you take on more associations.

Here are some key points to keep in mind as you refine your process:

• Match your controls to your portfolio size and invoice volume.
• Keep one documented accounts payable workflow and use it for every association.
• Separate sourcing, approval, and payment to protect the association, the board, and your company.
• Add automation before the warning signs show up, not after.

If you want to put this into practice, Buildium’s property accounting features can help your team pay association bills accurately. You can try the platform with a 14-day free trial or sign up for a guided demo with a product specialist.

And for a dedicated solution, that’s laser focused on accounts payable, check out what LeapAP has to offer here.

HOA Accounts Payable: Frequently Asked Questions

Who Approves HOA Bills Before They Are Paid?

The board, or a finance committee it appoints, approves bills according to the association’s governing documents. Many associations set a dollar threshold above which board approval is required before any payment goes out.

What Are Internal Controls in HOA Accounts Payable?

Internal controls are the checks that keep any single person from sourcing, approving, and paying a bill alone. They include segregation of duties, written approval thresholds, vendor verification, and an independent monthly reconciliation.

When Does an HOA Need Dedicated Accounts Payable Software?

Dedicated software tends to pay off once an operation processes a few hundred invoices a month or more. At that volume, the cost and time of handling bills by hand start to outweigh the cost of a tool that captures, codes, and routes them for approval.

What Is Segregation of Duties for a Small HOA Team?

Segregation of duties means the person who enters a bill is not the only one who approves and pays it. On a small team, the board treasurer or a second staff member can review larger payments, which keeps more than one set of eyes on the money.

How Do You Prevent Fraud in HOA Bill Payment?

Combine several controls rather than relying on one. Segregate duties, require two approvals above a set amount, verify vendors and review contracts yearly, and have someone other than the payer reconcile the account each month. Read more on Accounting & Reporting