I found the following info:
https://hoacpa.com/wp-content/uploads/2018/08/FAQ-Why-and-How-to-Budget-for-Bad-Debts.html
In both my previous and current Association, we did not have a line item for bad debt.
Our budget would have annual income (as if all members paid on time) and annual expenses (broken out in various line items).
At the end of the year, some line items may be on budget, under budget or over budget (depending on the actual expenses or amount of delinquent members).
The Board can authorize a delay in deposits to the reserves if needed to offset a bad year or simply defer some other line item (in my last Association, it was adjusting the amount spent for pruning trees or delay a need to spend funds for legal issues).
To address members not paying on time, our operating account (checking) would be budgeted for a beginning balance on January 1 (or the start of your fiscal year) equal to two or three months expenses. The actual amount would vary depending on advance payments and delinquent accounts.
This cushion is used to address the difference between the bills becoming due and the receipt of income. In a case where one or two members consistently don't pay, you may need to increase the overall assessment amount to allow for more leeway in the budget item.