Budgeting for HOA delinquencies is a critical task for management companies as they prepare their 2025 budgets. But in today’s ever-changing HOA landscape – including the impact of inflation and other economic and political uncertainty that alters a homeowner’s ability to pay assessments – the right budget allocation is very difficult to determine. With AI revolutionizing HOA collections, your 2025 budget will need to consider emerging technologies, economic shifts, and past delinquency trends to ensure your organization remains financially secure.
How Much Should I Allocate for Delinquent Payments in My HOA Budget?
Allocating for delinquent payments typically requires analyzing historical delinquency rates, economic forecasts, and the efficiency of your collections process. Historically, an average of 8.42 percent of units in community associations become past due, according to the Community Associations Institute. However, AI-driven solutions, like those offered by TechCollect, are reshaping these numbers.
By incorporating generative artificial intelligence into your communication workflows for collections, you can expect to resolve up to 70 percent of delinquencies before attorney involvement, reducing the overall financial burden significantly. AI can recover $6.3 billion of the estimated $9 billion in delinquencies across the United States, as outlined by our recent whitepaper. This means that instead of setting aside large portions of your budget for delinquent accounts, you can allocate a smaller reserve while leveraging AI to manage accounts receivables more effectively.
Projecting Your 2025 HOA Budget
Overall, one of the biggest mistakes that management companies make is planning a budget with the assumption that 100 percent of all revenue will be recovered within the year. This means that you are expecting to have all homeowners pay all assessments 100 percent of the time.
At a minimum, unless you are planning to pull money out of reserves, one should assume that 91 percent of the revenue will be collected. When reviewing historical data on revenue collection versus delinquencies, this percentage can ebb and flow.
Best Practices for Budgeting Delinquencies in HOA Accounts Receivables
- Review Historical Data: Begin by looking at your community’s past delinquency rates. Most HOAs average around 8-10%, but higher assessments or economic downturns could increase that figure.
- Account for Economic Uncertainty: Economic shifts can impact homeowners’ ability to pay assessments. Set aside a contingency reserve for unexpected increases in delinquencies, especially if your community is prone to recent events that cause considerable economic fluctuations. For instance, if you are one of the many communities impacted by the devastations of Hurricane Helene, you should plan accordingly.
- Factor in Legal Fees: When reviewing your delinquency from 2024, calculate the percentage that needed attorney involvement and plan for those expenses in comparison to the number of homeowners who will reside in your communities in 2025.
- Leverage AI for Efficient Collections: With AI, community associations are resolving delinquent accounts faster and with fewer resources. Using AI could decrease your need for excessive reserves, lowering the financial pressure on the rest of the community. Review the financial impact that would occur if you were to invest in AI collections technology for HOAs as opposed to investing in attorney fees.
Using AI to Manage HOA Collections and Delinquencies in 2025
AI is no longer a futuristic concept; it’s a practical tool that community association management companies can use today. By adopting AI-powered solutions like TechCollect, you can significantly reduce your HOA’s accounts receivables, improve collections efficiency, and ease the financial strain on your communities.
If you’re ready to see what TechCollect would mean for your 2025 budget, let’s talk. Book a demo with TechCollect and see how AI can streamline your HOA’s accounts receivables and reduce delinquent payments in 2025.
