Maintaining Accounts Receivable ledgers is a critical task for any business, but it is especially important for community associations and can be tricky to get it right. Conceptually, the task at hand is relatively simple; add assessments and reduce the open assessment amount by any posted payments. In an ideal world where everyone pays on time, you would only touch a ledger once a month, quarter, every six months, or per year, depending on your assessment schedule. However, the math can start to get complicated when a homeowner fails to pay on time, or when fines are imposed for uncured covenant violations, or when a mix of state laws and community rules force you to do some acrobatic arithmetic. Once an owner goes delinquent or pays on an irregular basis and the ledger is not kept properly, it can spell major trouble for the association when it comes to collection efforts. Here are three tricky things about homeowner ledgers and how eUnify helps you bust the ledger out.
Monthly, quarterly, semi-annual, or annual assessments, late fees, and interest are all predictable charges that should post on a periodic recurring basis. Adding these charges is straightforward enough, but some communities make things difficult with variable schedules that use a “percent ownership” or some other basis for calculating assessment amounts.
eUnify: Set up a full schedule of recurring charges for each association and assign to all or select accounts in the association, which means variable assessments are supported, and late fees or other charges can be suspended on specific accounts at-will. The Board could vote to suspend late fees for a particular homeowner experiencing hardship and the manager could simply click a “through date” to suspend the late fee recurring charge profile. All recurring charges can be set to post automatically, and further rules can be set so that late fees only post to accounts where the open balance is above a specified threshold on a certain day of each month. eUnify makes recurring charges smart and automatic.
The allowable rate and formulas for calculating interest on unpaid assessments can vary wildly from state to state and community to community. Laws governing things like maximum rates and which types of outstanding transactions can be included in an interest calculation differ by state. For example, Florida state law only allows for a maximum of 18% interest while Louisiana caps assessment interest at 12%. Rates set forth by statute supplant supplants any higher rate that may be enshrined in a community’s governing documents. Working with attorneys in the community association practice area for over ten years, I can tell you that one of the biggest challenges is verifying that interest charges posted to accounts prior to collections is correct because changing rules and complicated ledgers are hard to keep track of. I’ve even heard of some associations and some attorneys opting to forego interest entirely to streamline ledgers and eliminate the hassle of calculation.
eUnify: Set up interest calculations for use in recurring charges for your associations. You have total flexibility in setting the rate, type of calculation (simple, daily 360, or daily 365), and the types of charges to include when calculating interest. You can set up multiple interest recurring charges and selectively assign to accounts. You might have regular interest on principal accruing during collections up to the point of a judgment, for example, at which point statutory or court-ordered rates might differ from the association’s standard. Interest is always the trickiest part and eUnify can help you get it right once and for all.
In some states, such as Florida, keeping association ledgers is a tricky business due to statutory payment application requirements, which establish a specific hierarchy with respect to how payment funds should be applied. When such an order is predetermined, applying payments is not as simple as paying down the oldest amount in arrears before newer amounts. Any funds received must be applied in order of priority assigned to various types of transactions. Florida’s statute, for example, directs, “Any payment received by an association must be applied first to any interest accrued by the association, then to any administrative late fee, then to any costs and reasonable attorney’s fees incurred in collection, and then to the delinquent assessment.” If you can’t prove payments have been applied correctly before a judge, then you risk the ability to collect delinquent balances.
eUnify: Create payment application rules that remove the guesswork when adding payments and take the burden away from the end user. Application rules tell the system how to apply payment funds by default and users can override for special considerations. When payments are added manually, or via integration for lockbox payments processed through integrated banking partners, the funds are applied automatically using assigned application rules. eUnify helps you comply with statutory order of payment application with simple setup.
eUnify users can enjoy the benefit of integrating accounts and ledgers with appLega’s attorney clients. appLega provides software to attorneys in the community association practice area, specifically a case management product for assessment collections and covenant enforcement matters, called HOACollect. This integration makes possible the synchronization of ledgers, automated export and setup of new delinquency accounts in the attorney’s system, and better reporting and transparency for boards and managers. Ask your attorney if they use HOACollect, by appLega (more information at www.appLega.com)
Tags: hoa accounting