Great…Your HOA budget is done. Did you forget anything?
It took some time but you finally put your community association’s budget together. You did all the right things. You reviewed last years budget and compared what you budgeted for and what you spent. You made all the adjustments. You considered the utilities and price increases and plugged them into your new budget. You budgeted for reserves because you know how important they are. Even some capital improvement projects were anticipated and put into the budget.
What did you forget?
Did you forget insurance? No, it’s right there.
How about utilities? Oh, excuse me there it is.
How about accommodating for bad debt? Not there?
Most communities forget to include a line item for bad debt in their association budget. Will the association experience a owner not paying some or all of their obligations in the coming year? Do you expect that a bank will foreclose on a property and the owner will leave you with a bad debt write off? Then it needs to be in your budget!
Like it or not bad debt is an expense, just as sure as utilities, landscaping, and insurance. If you don’t take this unfortunate expense into account, your budget will be inaccurate and your community may experience budget shortfalls in the coming year.
I get it. Nobody likes to add expenses to the budget that may or may not happen. At best it’s a guess, but as sure as the sun shines every morning, you will have bad debt, and if you wish to govern your association properly you need to budget for this expense.
To help make your budget efforts easier, we’ve created a great new tool for you to consider for that most of unhappy expenses. Just plug in the numbers into our assessments calculator and see how these bad debts will affect maintenance fees. It’s easy to use and if you want to craft a more perfect budget you should take bad debt into consideration.
If you have to write off bad debt then it must be included in your annual budget. However, don’t let the write off be the end of it. Axela’s collection service can recover bad debt write offs. Better yet, we can collect from delinquent owners so that you don’t have to experience these losses. All at no financial obligation to the community. Now that’s a smart decision for any budget!
Mitch Drimmer is a respected thought leader in his field and has led numerous continuing education classes in collections, His articles have been published in key trade journals and newspapers, and he is a speaker at educational seminars. Drimmer is also a former board member of the Florida Community Association Professionals (FCAP) and earned his company the distinguished FCAP Reader’s Choice Award for collections four years in a row. Throughout his career, Drimmer has worked with community associations to help them see their way through tough times, especially during the real estate crash. He is a passionate advocate for community associations and has participated in the legislative process over the years trying to bring fair and equitable legislation that serves community associations.
Drimmer earned a BA in History from Hunter College and served as CEO of Drimmer Industries, Inc. in New York City for 35 years.