CAM vs PMS... What Software Should I Choose?

Posted by Andrea Drennen, CMCA on May 11, 2018

Community Association Management Software vs Property Management Software?

Shopping for new software can get confusing fast. A lot of property management software companies will try to convince you that managing HOAs is similar enough to rental management that you can use the same software. (and they'll spend plenty of advertising dollars to convince you!)

While it is true that you CAN manage community associations in a rental software, it's nowhere near the same. Community Associations like HOAs, Condos and Co-ops have some very unique aspects that make it difficult to shoehorn into a generic PMS.

Let's Talk About How Communities Do Accounting

The way Community Associations handle accounting is wholly unique, because every home has an owner (even if it's the bank), and a community doesn't grow or shrink beyond the size that was set when the builder filed the plat map with the city. Membership is mandatory, so homeowners cannot opt-out of paying their monthly dues. This ability to precisely predict income each month is called Balance Forward Accounting, and it makes community association accounting predictable, something that is completely unheard of in other sectors of business and government.

The community association always knows exactly how much money it should make, and if it has difficulty collecting, it can always file a lien to get what's owed. While most communities allow homeowners to pay Assessments (or dues) throughout the year, the amount of dues is typically defined in the Governing Documents of the community as an annual rate. This means the community association can charge a homeowner who breaks the rules (by not paying their assessments, for example) for the entire year of assessments, not just the part that they have missed so far. This process, called Accelerated Assessments, is also unique to community associations. 

Secondarily, community associations are responsible to save money in a very specific rainy day fund called a Reserve Fund. Reserve funds are based on a Reserve Study that attempts to predict the remaining lifespan of every aspect of the community, from the tennis court nets to the elevators to the roofs on the buildings. That prediction dictates how much life is left before each item needs to be replaced, and how much it will likely cost to replace when it's time. These predictions have to be as accurate as possible, so that the community association will be financially capable of making that major investment when the time comes. (insurance adjusters have nothing on reserve engineers!) the association must save, and they must invest those savings, but there are very strict restrictions on how they can invest. This is called Fund Accounting.

Furthermore, community associations are governed by a volunteer board of directors, most of whom have not worked in community association management and do not understand on a deeper level what community association accounting entails. So community association managers and CAM accountants need to provide simple, easy to read and understand financial reports on a monthly basis so the board can use that information as a guide to governing the organization. These are called Monthly Financials. While financial reports are in no way unique to community associations, the need to provide simplistic but accurate financials that a voluntary board serving only an hour a week can use is a defining use case for community associations.

These things combined are entirely unique to community associations. No other industry or sector has this unique combination of accounting needs. And yet, community associations regularly attempt to force their accounting to work in generic accounting packages and rental management packages. What they fail to realize is that in doing so, they are missing out, or working harder than necessary to serve the needs of the communities in their portfolio.

Industry-specific back-office community association management software is designed specifically with community associations in mind. All of the above needs are accounted for, plus compliance with laws governing community associations, and convenience features to better maintain the communities you manage.

What a PMS Brings to the Table

Unlike CAM software, which is super specific, PMS software brings an 'all things to all people' option to the industry. It's a step up from a generic accounting software, which is not tied to the real estate industry at all, but it is often varied enough to work for multiple aspects of property management (commercial, rental, associations, landlords, short term rentals).

Property Management Software typically has a different set of core specifications. Features like a rent-roll are important to manage the rents for all of the units one manages. Occupancy is important to track because the building owner's income ebbs and flows as the units are rented out on a consistent basis. To make sure the rentals keep coming in, most PMS software incorporates marketing tools to advertise open units on Craig's List and other sites. Unit inspections are also typically highly featured, as it is important to maintain the units in good shape to insure maximum occupancy.

While all of these features are important for multi-family and other rental organizations, they have zero value to community associations. But, there are some selling points of a generic PMS for some management organizations:

  • If your organization is large enough, and your portfolio evenly spread between rental and associations, you might consider splitting your company into divisions, and providing the multifamily and commercial divisions with PMS software, and the Association division with CAM software.
     
  • If your portfolio is mixed, with much of your overall portfolio consisting of rental or commercial properties, a generic PMS can be an economical choice.
     
  • If you are a smaller organization, such as a self-managed community, a cheaper landlord PMS can be a good entry point to managing your community finances.
     
  • If you do go this route, be prepared to deal with the downsides of a generic software. Chances are, your requests for features or additions will be drowned out by the glut of people on the rental side of the package, clamoring for more marketing tools.

My Two Cents on the Matter

In my (totally biased) opinion, generic Property Management Software that was designed for rental management first and later changed to work for community associations will always fall behind a CAM industry specific solution, because the features for community association management were tacked on to the existing engine, not lovingly crafted with that chassis in mind.

So, if you are looking for a generic, overall software to manage a very mixed portfolio, by all means go with a generic PMS.

But if you are in need of a lovingly-crafted product exclusively designed for community association management, you'll want CAM Software. If you want a product that is compliant with all the standards and the ever-changing sets of laws governing community associations, you need CAM Software.

If you're hunting for a solution whose service staff are experienced CAM professionals themselves who have a deep understanding of how Community Association Management works and how the books are supposed to be managed (and who can coach your back-office team with online resources, training classes and direct consultations) who care about the success of your management company, look no further than your friendly Community Association Management Software.

We humbly submit TOPS [ONE] for your consideration.

20 questions to ask when considering cam software

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