"Is a 99% collection rate a good number?" | How to correctly read the "report card of the management association" known as the delinquency rate

How to interpret the delinquency rate to see the reality behind the numbers: From the front lines of condominium management fee and repair reserve fund delinquencies, Part 56

While looking at the monthly report from the management company, the
board chairperson asked the property manager.

"It says 99% collection rate, but
is this a good number?"

The property manager thought for a moment before answering.

"Looking only at the number, it is a fairly high level."

"So, does that mean there is no problem?"

"...However,
the breakdown of that 1% is what concerns me.
Depending on whether it is one case or multiple cases,
and whether it is short-term or long-term,
the meaning changes completely."

"Does that mean that even with the same 99%,
it differs depending on how you look at it?"

"Yes.
The number is just one entry point."

Numbers are not the answer, but
the entry point to the question.

Today, I would like to organize
how to interpret the numbers of delinquency rates and collection rates.

▼1: "High collection rate = no problem" | That way of reading it makes the reality invisible

When reporting the delinquency status at a board meeting, it is often
presented as a single number: "XX% collection rate."

If this number is high,
the board of directors is relieved for the time being.

"99% is excellent."
"It's fine because it's above the industry average."

It is easy to have that kind of reaction.

However, from the perspective of "visualization"organized in Part 34,
a single number is just an "entry point" to the reality.

Even with the same 99% collection rate,
the situation behind it can be completely different.

Whether that 1% represents "one case that is late for the first time this month" or
"one long-term delinquency case that hasn't been collected for three years"
makes a world of difference in terms of financial impact and the urgency of the response.

Instead of feeling reassured by looking at the numbers,
the habit of reading behind the numbers
enables management that is based on the actual situation.

▼2: Three axes for reading the delinquency rate "in three dimensions"

To accurately interpret the delinquency rate and collection rate,
it is necessary to look at them through at least three axes.

Axis 1: Case-based or amount-based

The collection rate based on the number of cases and
the collection rate based on the amount are different.

Even if one case of delinquency in high-cost repair reserve funds
is just one case in terms of count, the financial impact is significant.

Part 51 and Part 54 To accurately grasp the impact on the financial plan organized in
it is essential to understand it on an amount basis.

Axis 2: Short-term delinquency or long-term delinquency

Short-term delinquency of 1 to 2 months from occurrence and
long-term delinquency of 6 months or 1 year or more
differ greatly in terms of recoverability and response costs.

Part 52 Regarding the impact on loan screening organized in
long-term delinquency also carries a higher risk in evaluation.

Even with the same "delinquency present",
the meaning changes depending on the duration.

Axis 3: Comparison with the previous month/previous year (trend)

It is important not only to look at this month's numbers,
but also how they have changed compared to
three months ago, six months ago, and one year ago.

Even if the collection rate is 98%,
if it has been falling for three consecutive months, caution is required.

Conversely, even if it is 96%,
if it is on an improving trend, it is proof that the measures are working.

The "notice before it happens" mindset organized in Part 47is born from this
habit of reading trends.

▼3: The "4 patterns" of misreading the delinquency rate

Pattern 1: Judging by a single number alone | The pitfall of "It's 99%, so it's fine"

Pattern 2: Being satisfied with just comparing to industry averages | The mental stagnation of "It's above average, so there's no problem"

Pattern 3: Confusing collection rate with delinquency rate | Discrepancies in definitions lead to confusion in reports

Pattern 4: Just receiving reports without asking questions | The numbers end with the "report"

▼4: The "4 designs" for using the delinquency rate as a "management indicator"

1. Incorporating "3 axes" into the report format

② Establish a "danger zone" threshold as an association

③ Create annual trend graphs

④ Evaluate improvement in the delinquency rate as a "performance indicator"

▼5: "Two condominiums that are completely different even at 99%"

Condominium A.

99% collection rate.

Looking at the breakdown,
it is only one case that is one month late for the first time this month.

It had been 100% until the previous month.

When the front desk contacted them immediately,
they said, "I forgot to make the transfer," and it was paid the next day.

There was no substantial problem.

Condominium A.

Also with a 99% collection rate.

Looking at the breakdown,
there is one case of long-term delinquency that has not been collected for over two years.

The cumulative amount exceeds 500,000 yen.

Legal proceedings are being considered, but
they have not progressed.

The numbers are the same.

But the impact on finances,
the urgency of the response,
and the evaluation from the outside
are completely different.

"It's 99%, so it's fine" is something that can only be said for
Condominium A.

▼ Summary: The delinquency rate is not the "answer" but the "entrance to the question"

The figures for collection rate and delinquency rate are
important indicators showing the financial health of a management association.

However, if you don't know how to read those numbers,

"they will only be numbers to make you feel at ease."

Read behind the numbers.

Look at them three-dimensionally using these four factors.

And ask questions.

This habit
turns numbers into "management tools."

The delinquency rate is not the answer,
it is the entrance to the question.

▼ Today's One Action

Please have your most recent monthly report at hand.

"Behind the number called the collection rate,
is there a breakdown of the number of cases, the amount, and the duration?
And can you compare it with the previous month?"

If only a single number is being reported, please start by requesting the breakdown at the next board meeting.

Thank you for reading this far. If you feel like, "I wonder if I was reading our numbers correctly," it would encourage me if you could like or share this. I would be happy if you could deliver it to someone who has the same concerns.

I will continue to share useful perspectives from the field. Please follow me if you'd like to stay updated.

If you don't mind, please take a look at these as well 👀

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[No. 19]

[No. 34]

[No. 41]

[No. 47]

[No. 51]

[No. 52]

[No. 54]