Operating Procedures Manual
2.8. Accounts Receivable
As a matter of sound business practice, it is sometimes necessary that services and/or materials be sold on a credit basis, resulting in the creation of accounts receivable for the selling agency. The value or success of such a business practice is determined by a number of factors, some of which are the proper selection of persons/agencies to whom credit is granted, the amount of control exercised over the accounts, and the ultimate collection of cash due from the accounts.
Whenever possible and practicable, it shall be the position of the University to obtain cash as immediate settlement for services or materials sold to a person or agency. Cash must be immediately obtained in all cases for transactions which are minor in amount to reduce the additional record keeping which is inherent with an accounts receivable system.
All employees of the University are responsible for promptly reporting any sales on a credit basis to Accounting Services unless the department in which the employee works has been delegated the authority, by this policy, to invoice the person or agency that has received the service/material.
Employees should contact the Accounts Receivable office for credit information on non-business accounts prior to delivery of any products or services.
Unless specifically authorized to do so in this policy, no department, office, or division of this University may prepare any billings to any agency or person for services or materials sold. For the purposes of this policy, billing is defined as an invoice in any format, a letter billing, verbal billing, or any other format which might be conceived.
All invoice formats shall be approved by the controller.
Payments on all invoices are to be directed to Accounting Services.
Terms of payments for all billings issued or to be issued by the University shall be prescribed by the controller. Normal terms of payment are:
- For cost reimbursements under research contracts: net 30 days
- For various other transactions: net 30 days
In the event payment on any invoice is misdirected to an office other than the one authorized to receive it, the receiving office must deliver the payment to the proper recipient as soon as practical so improper collection action will not be initiated.
All accounts receivable are to be promptly recorded in the books of accounts by Accounting Services. This will insure basic control over amounts due the University.
Accounting Services is responsible for follow-up on all accounts receivable which have not been paid in accord with terms of the credit agreement. It may be more effective, on occasion, to have a representative of the department which originally requested a billing to assist with collection efforts. Such aid should be provided, if possible, when requested by Accounting Services.
Guidelines for write-off (cancellation) of accounts receivable are generally as follows:
- Error in the original billing. There may have been an error made when a billing was originally requested or an invoice should never have been requested in the first place. While this may happen on occasion, departments should be very certain that an account receivable does, in fact, exist before requesting a billing. Also a billing may have to be replaced by another when some of the billing data is found to be incorrect.
- Uncollectable accounts may be written off only after certain efforts have been made both internally and externally to collect on these accounts and have proven unsuccessful.
- Departments which are authorized under the credit policy of the University to extend credit for the sale of any service or materials forward a Request for Invoice form, available from Accounting Services or the Web site <http://www.mtu.edu/fso/>, to Accounting Services. Invoices for less than $50.00 will not be issued. Where charges accrue to project accounts controlled by contracts, such charges do not have to be reported to Accounting Services since the costs are recorded directly into the accounts and are automatically billed.
- The invoice must be sent with any materials being forwarded to the debtor.
- The memo requesting the invoice must be complete in all respects to substantiate the charges shown thereon, such as the:
- Name, address, and phone number of debtor.
- Name of department which provided the service or material.
- Names of persons who performed any services rendered, with their rates of pay, days and/or hours worked, and type of service performed by each.
- Description of materials consumed or used, including unit costs, hourly rates (for use charges), etc.
- The requestor, if there is any basis for making an alteration to the charges shown on an invoice already released, prepares a memo explaining the circumstances to Accounting Services, who will be the final authority on whether adjustment to the charges previously billed are justified.