Operating and reserve accounts are the two most common types of accounts used in a business. Both can help reduce the risks and hassle that may affect your financials.
This article differentiates an operating account and a reserve account, their purpose, and their benefits so you can set up these accounts without any problems.
What Is an Operating Account?
Operation accounts in any business, such as your condo association, allow you to pay for the operating expenses and income out of it.
You might get your condo fees, which are considered your income, and then pay out any expenses such as utilities, insurance, or other expenses that might come up using the funds from your operating account.
What Is a Reserve Account?
You should consider your reserve account as a piggy bank or your savings account. This is where money gets set aside for future issues.
This can also include money for planning capital improvements or future work on your building.
Why Have Both Operating and Reserve Accounts?
As a general guideline, we suggest maintaining a certain amount in both of your accounts.
We usually keep 10% from the operating account as a percentage to be moved to the reserve account, and this is your planning fund.
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If you or anyone else you know is looking for an experienced property management company that will give you peace of mind by managing your operating and reserve accounts, please think of Boston HOA Management.
