Insights

Operating expenses and reserve expenses differ primarily in their timing and purpose.

Operating expenses are incurred regularly as part of day-to-day business operations. They include expenses like rent, utilities, salaries, and typical landscaping maintenance costs that occur during the normal course of the year. Reserve expenses are set aside in anticipation of future needs or unexpected events. They’re not incurred regularly but are established as a precautionary measure to cover potential liabilities or expenses that may arise in the future.

The primary purpose of your operating expenses is to support the ongoing activities and functions of an association. They directly contribute to revenue generation and are necessary for maintaining the association’s operations and continuity. Reserve expenses are intended to provide financial security and mitigate risks. They serve as a contingency fund to cover unexpected events, such as economic downturns, legal liabilities, or unforeseen circumstances.