Service Charge Financial Management
Directors can see where the money has gone as it stands, rather than waiting for a report to be compiled at the end of the year.
What This Covers
- Service charge budgeting, invoicing and collection
- Year-end reconciliation of actual costs against budget
- Payment by bank transfer: we cannot accept cash, cheques or cards
- Statutory year-end accounts and reporting for directors
Building the Annual Budget
The service charge budget is prepared ahead of each financial year and is based on the anticipated cost of managing, maintaining, repairing and operating the development. It is apportioned between properties according to the lease, transfer or other governing documentation rather than by any rule of our own.
Costs move, so budgets move with them. Inflation, utility prices, the age and condition of the building, changes to service contracts, insurance premiums and new regulatory requirements all feed in. We prepare estimates that reflect both previous expenditure and the anticipated cost of delivering the required services in the year ahead, and payment frequency is agreed with the directors at the start of each budget year.
Collection, Arrears and Residents in Difficulty
Service charges are invoiced in accordance with the lease to ensure recoverability, with invoices stating the amount due, the due date and the period covered. Payment is by electronic bank transfer using the reference on the invoice. We do not accept cash or cheques, and we are unable to accept card payments, because card providers apply transaction fees that cannot fairly be charged back to individual property owners.
Where a resident cannot pay, the practical answer is to tell us early. Service charges correctly demanded remain legally recoverable and we cannot waive them, but a short-term arrangement can sometimes be considered, and the accounts team would rather have that conversation than pursue recovery.
Year-End Reconciliation
At the end of each service charge year, actual costs are compared against the budget and accounts are prepared reconciling all income and expenditure.
Where expenditure has exceeded the budget a deficit arises, and where the lease permits, a balancing charge may be payable to recover the shortfall. Where expenditure came in under budget, the surplus is applied as the governing documentation provides: credited to the service charge account, transferred to the reserve fund, or otherwise applied as permitted. Which of those happens is determined by the lease, not by preference.
Reporting That Directors Can Actually Use
Directors receive year-end accounts and statutory financial reporting, and consistent reporting through the year rather than only at the end of it.
Through the platform, directors have enhanced access to the financial position as it stands: they can review bank statements, run financial reports and track arrears without waiting for a report to be compiled. Leaseholders can see the documents relevant to them. The intention is that nobody has to ask permission to understand where their money has gone.
Common Questions
What Happens at the End of a Service Charge Year?
Actual costs incurred are compared against the budget and accounts are prepared to reconcile income and expenditure. If expenditure exceeds the budget a deficit may arise and, where the lease permits, a balancing charge may be payable. If expenditure is lower, any surplus is applied in accordance with the lease, which may mean crediting the service charge account or transferring it to the reserve fund.
Why Has My Service Charge Increased?
Service charges are reviewed annually against the anticipated cost of running the development. Increases can follow from inflation, rising utility costs, increased maintenance requirements, the age and condition of the building, changes to service contracts, insurance premiums and new or revised legislative requirements.
How Can I Pay?
By electronic bank transfer only. Payment instructions and the reference to quote are on your service charge invoice. We are unable to accept cash, cheques or card payments.
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