Recession on the Horizon? Take Steps Now to Make Your Association Ready!
Does your self-managed condominium or HOA have anything to worry about when banks and other major financial institutions predict a coming recession? There sure is! Take steps now to prepare for the damaging financial effects of a recession.
Forbes.com, Fortune.com, and even CNN have all run stories recently predicting a long-lasting recession that will have effects for years to come. Most experts are predicting the recession to begin sometime in 2023 and lasting at least 4 years, maybe longer. Factors include the inflation rate hitting 8% and unemployment hitting all-time lows have been precursors to recession in the past and experts are saying the same is true this time. Deutsche Bank was the first major bank to predict a recession and others have been quick to follow.
What can you expect? Inflation has already increased prices on most consumer items purchased by your condominium or HOA. Supply chain issues have created additional stress on prices and labor shortages have also contributed to increased expenses for self-managed associations. Community Financials has previously warned clients that inflation was going to be a budget concern for all associations. Read more here: The harsh reality of post covid inflation and community association budget preparation
What can you do? Recessions are stressful, both financially and emotionally. It is time to take a full inventory of strengths and weaknesses in the association’s financial standing. If you haven’t already done so, strongly consider a strategy of increasing assessments to strengthen the association’s financial position. Read more here: Increase your hoa or condo assessments before the next recession
Recessions drive down consumers’ ability to make ends meet. Deciding between paying a credit card bill or an HOA assessment can challenge association members during a recession. Adopt a Uniform Collection Policy now so that association members realize that not paying their HOA dues will have consequences. If delinquency rates soar because members decide to not pay their fees, there needs to be a plan in place for how the association will pay its bills.
Community Financials can help, we offer homeowners the ability to pay their assessments with a credit card to stay current. If they fall behind, we enforce your collection policy by applying late fees and sending late notices. Additionally, we have a great partnership with a national collection agency that is more cost-effective than attorneys and friendly to owners while improving enforcement including reporting delinquent owners to the credit rating agencies.
Avoid making the decision to borrow from or not fund the association’s Reserve Fund. It is tempting to think of the Reserve Fund as an Emergency Fund but that is not what it is for. If any money is used from the Reserve Fund to fund operating expenses, a plan to replace that Reserve Fund must be put into action. That may include Special Assessments or additional contributions to Reserves to make up the deficit.
Community Financials helps associations prepare realistic budgets and weather tough times. If your association is looking for expert guidance as it prepares the upcoming year’s budget, we can help. Get in touch with Community Financials today and let’s talk about your budget and how to defend the association from the ravages of recession.
