When a Condominium Association Creates a Cash Flow Plan, What Amount of Time Must the Projection Be Based On?

When creating a cash flow plan for your Chicago condo association, the amount of time the projection should be based on depends on a number of factors, including the size of your association, its financial history, and your association’s future goals and plans.

In general, most condo associations create cash flow projections that cover a period of at least one year, but some may choose to create projections that cover a longer time frame, such as three to five years.

What is a Cash Flow Plan?

A cash flow plan is a financial tool that helps individuals or organizations manage their cash inflows and outflows over a specific period. In the context of a condo association, a cash flow plan helps the board of directors manage its financial resources and ensure they have enough cash on hand to cover any ongoing expenses and obligations as well as fund any planned capital improvements.

A cash flow plan involves creating a detailed projection of the association\’s cash inflows – this includes revenue from assessments, fees, and other sources – as well as outflows – such as operating expenses, debt, and capital expenditures. Cash flow plans are projected out over a specific period, usually at least one year.

The plan takes into account the association’s current financial situation, as well as any expected changes in revenue or expenses. The end goal is to provide a clear picture of the association’s cash flow needs. In doing so, board members can better manage the association’s financial resources and make informed decisions about budgeting and funding current and future priorities.

What Length of Time Should Your Projection Be Based?

The length of the projection period should be sufficient to cover both short-term and long-term cash needs, including regular maintenance expenses, unexpected repairs, and planned capital improvements. For most associations, this means projecting out at least a year to cover recurring annual income and expenses.

It\’s important to note that cash flow projections are not set in stone and may need to be updated periodically to reflect changes in your association\’s financial situation or operating environment. Regularly reviewing and adjusting the projection can help ensure that your association is able to stay on track with all financial goals and obligations.

Why Should the Board Monitor the Association’s Cash Flow Plans?

By monitoring your association’s cash flow plan, board members can effectively identify potential shortfalls or surpluses in cash flow and correct course before it’s too late. It can also help the association identify ways to fund capital improvements.

For help with financial management or any aspect of association management at your Chicago condo community, please get in touch with us at First Community Management for help.