External Customer Credit, Invoicing and Collection
The extension of credit on accounts to individual customers or organizations can be costly in financial terms, human resources expended in collection efforts, and in maintaining good customer relations. While cash or credit card sales are the most optimal and least risky form of transacting with customers, it may also be in the University’s best interest to allow some customers to purchase goods or services from the University on a credit basis.
The purpose of this policy is to:
- establish guidelines by which credit is extended to external customers on a consistent basis;
- manage the extension of credit within the various departments of the University;
- minimize the cost of collecting accounts receivable; and
- maximize cash flow.
This policy applies only to external customer accounts receivable of the University. It does not apply to:
- student tuition and fees receivable; and
- research contracts and grant receivables, which are monitored separately by the Financial Analyst of Research/Special Projects in Financial Services.
Extending Credit to Customers
University departments that provide goods or services to customers on a credit basis or are involved with invoicing sales of goods or services must ensure that transactions of this nature flow through Accounts Receivable in Financial Services.
When goods or services in excess of $10,000 are provided on a credit basis:
- a formal contract or written agreement is required to be executed; or
- prior approval from the Financial Analyst of Treasury/Capital (306-337-3292) in Financial Services is required.
In certain circumstances, a deposit from the customer may be required. An invoice should be used to obtain a deposit payment.
The University’s standard term of payment is 30 days from the invoice date. Before offering extended payment terms to customers, departments must receive prior approval from the Financial Analyst of Treasury/Capital (306-337-3292). Extension of credit beyond 30 days may only be granted when justified by unusual circumstances. Arrangements to extend the payment terms must be documented in writing with the specific credit terms shown on the face of the invoice.If an invoice is more than 30 days overdue, the University, with proper notification, reserves the right to offset the amount owed on the invoice against any outstanding payments the University owes the customer.
Criteria for Granting Credit Privileges
- The decision to grant credit to a customer takes into account the following considerations:
- capacity for payment
- credit worthiness
- past payment history
- dollar value and terms of transactions
- customer references
- Credit will not be granted to customers making one-time purchases of goods or services. These types of purchases must be paid by cash, cheque, or credit card. No exceptions will be made as the excess administration time required for processing these invoices is not economically justifiable.
- When credit of greater than $1,000 is requested, a credit application (38 KB) must be completed and approved by Accounts Receivable in Financial Services before credit is extended to a customer.
Invoicing a Customer
Banner External Invoicing is to be used whenever possible when invoicing a customer.
Manual invoices may be used in special circumstances, such as:
- internal invoicing that must be on a manual invoice
- miscellaneous department events
- by departments pre-approved to not use Banner External Invoices
Invoicing an external party in the form of a letter, email or conversation is not acceptable.
Collection of Accounts Receivable
Accounts Receivable in Financial Services initializes any collection efforts that may be required, including phone calls, reminder notices, etc. In the event that a customer disputes a charge, the appropriate department head will be responsible for resolving the disputed item(s).
Small Dollar Value Items
Invoices should not be prepared for small dollar value items. The administrative cost of processing a small dollar value invoice (for example $15.00 for the sale of a book) exceeds the amount to be collected. For small dollar value items, payment is to be collected at the point of sale, or by prepaid order.
The Faculty of Kinesiology and Health Studies (K&HS)
The Faculty of Kinesiology and Health Studies maintains the responsibility for extending credit to their customers and collection of customer receivable amounts for certain non-tuition extracurricular activities. K&HS uses a separate accounts receivable system called CLASS; however, CLASS balances are electronically transferred into Banner daily.
Consequences for Noncompliance
Employees who extend credit to customers without following due process may be subject to disciplinary action. If external customer credit is not managed in accordance with this policy, it could be costly to the University and customer relations may be damaged.
Departments that have not made the move to Banner External Invoicing should make arrangements to do so. For information on how to obtain training, manuals, and access for the Banner External Invoicing System, contact the accounts receivable clerk at 306-585-5137.
- Customers are directed to send payments, with the invoice number identified, directly to Accounts Receivable in Financial Services.
- Revenues from invoicing are credited to the originating department upon completion of the invoice.
- If a payment is mistakenly sent to the originating department, it should be forwarded immediately to Accounts Receivable in Financial Services, with the invoice number identified, for processing and receipting.
- If payment is mistakenly posted to a FOAPAL account instead of forwarded to Financial Services, it will be reversed and posted to the respective vendor account.
- Each month, Accounts Receivable sends monthly statements to customers showing the outstanding balance due along with current month transactions.
- If a receivable account is not paid within 60 days, the customer is either contacted by phone or sent a reminder letter.
- If the account remains outstanding after 90 days, with the consent of the originating department head, Accounts Receivable sends a final notice letter advising the customer that, if the balance is not paid within 30 days, the account will be forwarded to a collection agency, legal action may be taken, and further credit privileges will be terminated.
- A list of accounts where final notice letters are sent will be provided to each department from which the charges originated.
- A service charge will be levied on external accounts receivable payments that are returned by the bank as NSF.
K&HS uses a similar collection process:
- Accounts greater than 60 days in arrears are sent a reminder notice;
- Accounts greater than 90 days in arrears are sent a final notice; and
- Accounts greater than 120 days in arrears can, at the discretion of K&HS, be forwarded to Financial Services for further collection efforts.
- Where customers have not responded to notices for settling their accounts receivable balance, and in the absence of a legitimate dispute, credit privileges will be terminated immediately.
- After all internal means of collection have been exhausted, uncollected accounts receivable balances will be charged back to the department where the charges originated.
- If it is deemed to be in the best interest of the University, further collection efforts will be undertaken by the University’s external collection agency and may include legal action, if necessary. Any amounts collected by these actions will be returned to the originating department, net of any service fees charged by the collection agency.
- Credit Application (38 KB)