Accounts Receivable

Money owed to the association by homeowners, typically for unpaid assessments, fines, reimbursement charges, or other amounts authorized by the governing documents. Accounts receivable appear as an asset on the balance sheet and represent income the association has earned but not yet collected. The board should review an accounts receivable aging report at every regular meeting, which categorizes outstanding balances by how long they have been overdue — typically in 30-day, 60-day, 90-day, and 120-plus-day buckets. A healthy association generally maintains total accounts receivable below 5% of annual assessment revenue; levels above 10% signal significant collection problems and can jeopardize the association's ability to pay its own bills, fund reserves, and qualify for FHA or Fannie Mae mortgage certification. High receivables also affect the operating budget because the association must budget for anticipated bad debt and may need to increase assessments for other owners to cover the shortfall. In California, the association's collection policy (required under Civil Code Section 5310) governs the timeline for pursuing overdue balances, from late notices through lien recording and foreclosure. Boards have a fiduciary duty to pursue delinquencies promptly and consistently. Reviewing receivables regularly allows the board to identify trends, evaluate the effectiveness of its collection efforts, and make informed decisions about when to refer accounts to legal counsel.