Purpose and Objectives
This policy outlines the handling of contractual arrangements, recording, collection and reporting of monies owed to our company.
Policy Scope/Coverage
This policy applies to all staff involved in our companyour company accounts receivable/trade debtor activities.
Policy Statement
A receivable is money owed to our company for goods or services purchased on credit. Receivables are trade receivables, which are sales to regular trade customers that have been completed but not yet paid for. All our company debt is administered through the our company‘s finance systems.
Prior to providing any work or services that will result in a material debt by a potential customer to our company, the organisational unit performing the work or services must perform a credit check on the customer to ensure that the likelihood of a default is minimised. The granting of credit to an individual or organisation must be based on a reasoned judgement as to their credit worthiness.
Cost effective procedures must be employed to ensure collection of all accounts receivable in a timely fashion. Such procedures may include due legal process where applicable.
Finance Officers are responsible for raising invoices for the organisational units in which they are employed.
Finance Officers are to only raise invoices after the goods or services have been provided, not before.
Where goods and services are provided under contractual arrangements, invoicing should be performed on an ongoing basis.
General Information
Our company raises invoices for the sale of goods and/or services to external organisations and individuals. Where an organisational unit provides goods and/or services to another internal organisational unit an invoice MUST NOT be raised. The policy and methodology for Internal Service Charges (ISC) are applicable in this scenario.
Prior to Billing
A number of steps must be completed before any work is performed by the organisational unit. These steps consist of obtaining a purchase order and identifying if the customer possesses an account in our finance system.
If the customer does not have an account the Finance Officer of the organisational unit must submit a New Customer Checklist. Please note, this form is an internal company document and is not to be sent to the customer for completion.
Once the the form is submitted, the application process commences and only once the customer’s account has been created in our finance system can the service be performed or the goods provided.
Raising a Bill
Finance and Business Services has approved two (2) methods for our company staff to request the creation of a bill.
Invoice Request Form
Where our company staff member requires an invoice to be raised for goods sold or services performed an Invoice Request Form must be created, approved by a Financial Delegate, and passed on to the Finance Officer for the creation of the bill.
The Invoice Request Form must be retained on file for auditing purposes.
Invoice Request Stamp
An organisational unit may use an Invoice Request Stamp in lieu of the Invoice Request Form.
Where our company staff member requires an invoice to be raised for goods sold or services performed, a Pro Forma invoice is created. The Pro Forma invoice must be stamped, using the Invoice Request Stamp, and approved by a Financial Delegate.
The stamped Pro Forma invoice must be retained on file for auditing purposes.
Billing training must be completed by a staff member before being given any access to the finance management system.
The finance management system should be used for the raising of all bills, excluding where known exceptions exist. Bills should be raised for amounts over $200.00. It is recommended amounts of less than $200.00 should be paid via cash or credit card facilities; if either of these methods is used, a tax invoice/receipt will be provided once the funds have been receipted. The tax invoice/receipt will contain the details of the transaction and is a tax invoice for GST purposes. Organisational units are responsible for raising their own bills on or before the next working day after goods have been supplied or services rendered to a customer.
Overseas bills
Bills can be raised in foreign currencies where required by contracts or agreements between our company organisational units and their customers. Any such bills are converted to Australian dollars by the finance management system when the revenue distribution is recorded in the ledger.
Distribution of invoices
The distribution of bills is handled centrally by the finance management system and occurs once bills have been raised and marked ready for dispatch. The dispatch occurs four times a day: 10:00 am, 12:00 pm, 4:00 pm and 6:00 pm Monday to Friday (excluding public holidays and the Christmas period).
Invoices are dispatched via email or in the post according to the customer’s preference for receiving invoices.
All new customer contacts are set up with invoice dispatch set to email.
Organisational units may choose to print a pro forma invoice copy of any invoices they raise; however, this is not an official our company document and cannot be sent to a customer for payment. Instead of producing pro forma invoices a Finance Officer may elect to run a Billing Summary Report which contains the invoice information.
Invoice attachments
Attachments can be sent to customers along with their invoices. These attachments are supporting documentation which must be attached onto the invoice prior to the invoice being dispatched. Attachments are to be a maximum size of 10MB and in PDF format only.
Collection and Receipting of Monies
Payment Options
Our company employs a number of payment options for invoices whicour companyh include the following:
- Payment by BPAY
- Payment by Credit Card (MasterCard, Visa or AMEX only)
- Payment by Cash
- Payment by Cheque
- Payment by Electronic Funds Transfer (EFT)
If the customer is paying by mail or in person: a copy of the invoice along with the payment should be presented or sent to our company Cashier.
If the customer is paying by credit card: credit card payments can be made online on our company website.
Where the customer uses the BPAY option: the Biller Code and reference number shown on the remittance advice are to be used. Note that the reference number changes every time a new invoice is created.
Where the customer uses the EFT option: a remittance advice must be emailed through to the finance team to help identify the payment.
Partial payments
Our company accepts partial payments for invoices via the same payment methods outlined in section above.
Non payment
If a customer refuses to make payment due to a dispute over the invoice, or the service provided, or for any other reason it is CFO’s responsibility to follow up the disputed invoice(s) within two (2) weeks.
It is also a requirement that a conversation is placed on the customer’s account advising which invoice(s) is (are) in dispute and the reason for such a dispute.
Outstanding invoice report
Each organisational unit is responsible for obtaining a report listing the outstanding invoices which have been raised by the Finance Officers within that organisational unit. This report (Ageing Detail by Billing Unit) is to be run on a regular basis.
Creating an Adjustment Note
Where our company staff member requires an adjustment note created as the original invoice is incorrect in some way, an Adjustment Note Request Form should be completed, be approved by a Financial Delegate, and passed on to the Finance Officer.
The Adjustment Note Request Form must be retained on file for auditing purposes.
Debt Collection
Our company distributes, at the beginning of each month, a statement of account to each customer that carries an outstanding debt.
Our company uses strict debt collection procedures and a letter is dispatched to the customer the timing of which is as follows:
- Invoice is 30 days or more overdue – Reminder Letter
- Invoice is 60 days or more overdue – Urgent Second Reminder
- Invoice is 90 days or more overdue – Final Demand
These debts are also actively monitored and pursued by the Credit Control Officer.
Once an invoice has been unpaid after 120 days will contact the organisational unit that raised the invoice to determine the appropriate action. In some instances the next logical step is to refer the debt to an external collection agency for follow up action.
In other cases there may be a decision to write off the debt.
Write-off of Debts
Heads of organisational units do not have the authority to write-off debts.
Only the CEO of our company has the appropriate level to authorise the write-off of uncollectible debts.
Write-off request
In order to affect a write-off of an unpaid debt, the organisational unit should work with the finance team to identify that the customer is bankrupt, in liquidation or is otherwise unable to make payment. A written request via a Request for Bad Debt Write-Off Form is to be prepared and forwarded to finance for consideration and processing. It is important that all information pertaining to the debt e.g. contacts, purchase orders, and/or email correspondence is appended to the form before finance can apply to have the debt written off.
Write-off conditions
Debts are to be written off under the following conditions:
- Where the debtor has moved address and all attempts to locate them have failed;
- When it is uneconomical to finalise recovery action due to the relatively small value of the debt and/or the potential cost of recovery is more than the initial debt;
- When the medical, financial or domestic circumstances of a particular debtor at the time does not warrant the taking of recovery action or further recovery action;
- Where the debtor is bankrupt, in receivership or in liquidation. The debt is written off until such time as funds may become available;
- Where legal proceedings through the courts have proved, or on legal advice, would prove unsuccessful; or
- Where our company’s collection agents advise that it is no longer cost-effective to pursue the debt.
When a debt is written off a charge equal to the amount of the debt will be made against the organisational unit’s equivalent chart string.
When, after a debt has been written off, a debtor becomes solvent, or is traced to a new address, the debt is reinstated to current files and the debt collection process re-activated. Such account reinstatement remains constantly under review, and is supported by search advice from our company’s debt collection agency.
Our company staff member is not authorised to inform a debtor that action has been taken to write off their debt.
Register of debtors
A register of debtors whose debt has been written off is maintained by the finance unit. The register records the details of the debt, the authority for write-off, and any subsequent action to reinstate the debt.
All bad debtors are to be refused further services by our company, until such a time as the debt no longer remains outstanding.
Refunding of Payments
Payments out of our company bank account, such as refunds, must be approved by a signatory in Finance and Business Services.
All refunds must be submitted to Accounts Receivable on a Refund Request Form.
Refunds sent to Accounts Receivable by email will only be paid once the original has been received. This is to eliminate duplication. Refunds may take up to 2 weeks to process.
Important things to remember when requesting a refund:
- Evidence of the original payment(s) must be attached;
- Amounts initially paid by credit card must be refunded back to the same credit card that was charged;
- Show the GST amount if applicable;
- The refund must be approved by a Financial Delegate with the appropriate approval level;
- Overseas refunds need to show the physical address for the customer and their bank;
- Care should be taken to ensure that the monies being returned are refunded to the original payer, after perusal of the correct payment source.
If a refund is to be paid to someone other than the original payer/name on the receipt the Refund Request Form must be supported by a letter or email from the original payer/name on the receipt confirming the reason for payment to someone else.
Refunds to someone other than the original payer may not be approved in all cases.
If a refund cannot be made to a client for any reason, then an application is to be made by finance staff to the Chief Financial Officer to transfer the credit amount.
The refund form is to be authorised by a Financial Delegate unit for processing.
If the required information is not supplied, forms will be returned immediately to the organisational unit for correction and processing will be delayed.
Invoice payments
Where an invoice has been overpaid, the customer/client must request a refund in writing to our finance team. The customer must also provide proof that a double payment, overpayment or payment error has occurred; this may include a copy of a bank statement or copies of remittance advices.
Large credit accounts are referred by the finance unit to the organisational units concerned to ascertain whether the clients in question are likely to receive further services from our company, if not, a refund may be arranged.
If however, a customer has overdue debts it is at the finance unit’s discretion to decide whether the refund may or may not be processed until all debts are settled.
Where invoices have been overcharged and then paid by the customer/client, an adjustment note must be created and a Refund Request Form completed by the organisational unit, both of which need to be forwarded to the finance unit for processing. Attached to the back of the Refund Request Form must be the customer’s bank details provided on the customer’s letterhead.
The form must contain the details of the original payment, amount and date(s) of payment and reasons for refund, as well as the adjustment note number to be refunded. If there is insufficient space on the form to record all of the required information, please attach a schedule for this purpose.
The refund form is to be authorised by a Financial Delegate and returned to the finance unit for processing.
If the required information is not supplied, forms will be returned immediately to the organisational unit for correction and processing will be delayed.
Payments where no invoice created
For general refunds where no invoice was created and the deposited funds were applied to our company chart string please complete a Refund Request Form. Evidence of the original payment must be attached. The chart string recorded on the form should be the one to which the original monies were credited.
If GST was included on the original payment, it should also be included on the refund and the split should be reflected in the chart field section of the Refund Request Form.
Sufficient information should be included in the “Reason for Refund” field of the form to enable to the recipient of the remittance to identify the reason for the return of funds.
Reconciliation of Finance Debtors
The finance unit is responsible for reconciling the outstanding debtors listing from the general ledger. The reconciliation must be performed as part of the month end process and should be reviewed at least on a weekly basis.