CENTURION, SOUTH AFRICA – According to the Sectional Titles Schemes Management Act (STSMA), sectional title schemes face strict requirements for financial administration. Lexpro Systems has identified five common financial management mistakes that trustees and managing agents encounter when navigating these requirements.
The “Hope Nothing Breaks” Strategy
The first critical mistake is inadequate reserve fund planning. The STSMA requires a reserve fund equal to at least 25% of the scheme’s administrative budget. Many bodies corporate maintain minimal reserves, leading to substantial special levies when major components like lifts, security systems, or roofing fail.
Wishful Thinking vs. Financial Reality
The second mistake involves flawed budget preparation. Many schemes approach budgeting as a formality rather than a critical financial planning exercise. Common errors include using the previous year’s budget as a template without examining actual expenditure, failing to account for inflation on service contracts and utilities, and not budgeting for contingencies.
The Growing Arrears Problem
Ineffective levy collection procedures represent another significant challenge. Without systematic approaches to collections, schemes often struggle with growing levy arrears. Many lack clear, documented collection policies, consistent follow-up procedures, and effective legal action against persistent defaulters.
When Generic Solutions Fall Short
The fourth mistake involves using generic financial systems not specifically designed for sectional title management. Many schemes rely on Excel spreadsheets, generic accounting software, or manual bank reconciliations. This approach creates risks including difficulty complying with regulations, human error in calculations, and vulnerability to fraud.
When Trustees Can’t See the Financial Picture
Insufficient financial reporting undermines trust and prevents effective decision-making. Many schemes present owners with minimal financial information—often just a single-page summary showing only total income and expenses. This lack of transparency prevents early identification of financial problems.
Modern sectional title management requires specialised systems that ensure compliance with sectional title legislation while providing accurate financial reporting and control.
Trustees looking to improve their scheme’s financial management can contact Lexpro Systems at 012 345 4510 or visit their offices at 118 Sovereign Dr, Route 21 Business Park, Centurion, 0157. Lexpro offers property management software designed specifically for South African sectional title schemes.
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