Kaman Cusimano Logo

Condo | HOA Lawyers

Budgeting for Bad Debt

As each year winds down, board members are gearing up for budget season.  Creating your association’s budget is a detailed and stressful process.  Annual budgets have to include all projected expenditures and reserves, so the board can determine how much to assess the owners.  In a perfect world, all owners would pay their assessments on time, so all contractors and bills are paid and all maintenance is done on time.  Of course, there is a good chance that all associations will deal with owners that fall delinquent on their assessments at some point.  Whether you have a large amount of delinquencies in your community, only one or two, or none at all, every board should consider and account for a line item in their annual budget for “Bad Debt Expense.”

Budgeting for bad debt is a difficult task, and there is no magic number to set aside.  The best way to determine an amount to set aside is to review past budgets, the status of current delinquencies, and the association’s current receivables.  While the board cannot predict an exact number for the upcoming year, it can make an educated estimate based on a review of the financials.  By budgeting for bad debt expenses, the board is ensuring that the association’s financials are in good shape and that the association is able to pay the projected expenses in the budget for the upcoming year.  As a result, every association should budget for bad debt.


Three bars icon gold

Recent blog Posts

Three bars icon gold

Partner Shannon McCormick appointed to the Northern Ohio CAI Board

We are thrilled to announce that Shannon McCormick, Partner, and Chair of our Cleveland Office, ...
Read More →

Attorney John Izzo presented at CAI Central Ohio Chapter’s Annual Meeting

On January 25, 2024, Attorney John Izzo took the stage as a distinguished panelist at ...
Read More →

Borrow or Assess? A Guide to Community Association Loans

When the time comes for major capital item repair, replacement, or restoration, an association has ...
Read More →

Partner M. Katherine (“Kate”) Bushey elected to CAI’s Business Partners Council

Partner M. Katherine (“Kate”) Bushey has been elected to CAI’s Business Partners Council. The Business ...
Read More →