The key to streamlining collection of assessments

May 02, 2003|By Pamela Dittmer McKuen, Special to the Tribune.

For small associations, it isn't a big deal to open envelopes containing assessment payments, log the amounts, add up the total and fill out a deposit slip. But if you've got dozens, maybe even hundreds of units, the job soon consumes hours rather than minutes.

Automated collection programs such as lockboxes and direct debit help community associations process their assessments more efficiently while keeping the money safer.

Such programs are "definitely growing in popularity," said Mark Stelter, vice president of commercial loans, Itasca Bank & Trust Co. in Itasca.

Some management companies require their client associations to have assessment payments sent to a lockbox, he said. A lockbox is a post office box to which owners send their assessments rather than to a management office. The association's bank picks up the envelopes, opens them and deposits the payments into the association's account.

Many banks offer additional custom services such as photocopying the checks, returning the envelopes and forwarding correspondence that has been attached to the checks.

Among the advantages to a lockbox: You'll have faster access to your money and, if it is deposited into an interest-bearing account, more time to earn that interest.

It's also secure, said certified public accountant Chris Nyborg, president of Nyborg & Co. in Hanover Park.

"From the standpoint of safeguarding the assets of the association, the fewer people you have touching your checks, the better off you'll be," she said.

Another program is direct debit, which allows unit owners to authorize the association's bank to electronically withdraw assessments from their personal checking or savings accounts. Direct debit eliminates the writing and handling of checks, which saves on storage space and personnel costs. Not having to remember to write a check on a particular day is convenient for those who travel frequently or winter in warmer climates. It also cuts down on delinquencies.

Depending upon the program, banks report back to the association or its manager in various ways. Reports sent electronically are especially fast, a boon in the case of insufficient funds, said Stelter.

If a unit owner writes a check for assessments and the check bounces, the process to notify the association takes several days. If that same unit owner had signed up with direct debit, electronic notification could take less than a day. "It helps with collection efforts," said Stelter. "The association can start calling the next day."

Property manager Michael Rutkowski, principal at First Properties LCC in Chicago, is a proponent of direct debit. It's a tool that can be used by self-managed associations as well as those that are professionally managed, he said.

"It's a common misconception that only management companies can set this up," he said. "If [a self-managed association's] bank doesn't offer it, they should talk to another bank."

The costs for automated programs vary, depending upon the size of the association and how intricate the reporting requirements, but are reasonable, said Nyborg.

"At a time when banks are charging for a lot of other things, we're seeing the prices coming down on lockboxes and direct debit," she said. "There is a big push to get people to pay electronically."

A lockbox arrangement starts at a few hundred dollars a year and goes up from there. If your association hires professional management, lockbox costs might be included in the monthly fees. Direct debit costs a few cents per item and is less expensive than handling a check. For either program, setup fees may apply.

If automation is not in your association's near future, at least take steps to ensure that assessment payments get where they are meant to go. Pre-addressed labels or envelopes can prevent misrouted mailings. Don't accept cash, especially without a receipt.

As for boxes or chutes where residents can drop off their payments, Rutkowski discourages their use.

"There are too many variables," he said. "The association says `we never got the check,' and the resident says `I dropped it in the box.' If an association insists on a drop box, then we insist they have someone who is willing to check it every day."

- Seminar. The Illinois Chapter of the Community Associations Institute is sponsoring a seminar, "Buildings and Grounds for Associations," from 7 to 9 p.m. May 13 at the Oak Brook Marriott, 1401 W. 22nd St., Oak Brook. The cost before May 6 is $25 for members and $35 for non-members; after May 6, add $10. For information and reservations, call 630-307-0659.