UC Davis, Department
Accounts Receivable Process and Controls Documentation
Fiscal Year 2017, DATE
Instructions: Fill out the documentation questionnaire first and then where indicated by yellow highlights, copy your responses from the questionnaire into the below template. Please update any reference to “department” with your department and also indicate the date in which this template was completed. Once finalized, please delete these instructions and utilize this as your process and controls narrative to be updated on an annual basis. Any questions should be directed to Laura Coletti, Associate Controller.
Section 1: Customer acceptance and maintenance policies/procedures:
Insert responses to Section 1questionsbelow:
The department complies with Section 340-09, Sales of University Goods and Services to Non-University Users which states:
Department heads may authorize the following:
a. Sales with total annual income under $5000 per fiscal year.
b. Unit transactions up to $500 per customer.
c. The $5,000 annual sales limitation for department head approval is for all customers combined in the aggregate, not a dollar or transaction limit per customer.
Once total annual sales exceed $5,000 per revenue creating unit or division, all subsequent transactions are processed through Business Contracts by submittal of a purchase agreement.
Section 2: Invoicing
Insert responses to Section 2questionsbelow:
Section 3: Application of payments:
As with all financial transactions, separation of duties is essential in AR; therefore, the department requiresinvoice payments to be sent to the Cashier’s Office, not to the department.
Insert responses to Section 3questionsbelow:
The Cashier’s Office applies all AR payments received based on information provided by the customer, in which the invoice numbers are indicated on the check stub or if the customer provides an accompanying invoice stub or remittance advice. If the check has no information regarding which invoice to apply the payment, the Cashier’s Office will research further.
If the indicated invoice does not match the payment amount, the difference will result in either a remaining unpaid balance on the invoice (if the check was written for less than the invoice amount) or an unapplied payment (if the check was written for more than the invoice amount).
Unapplied payments are researched by the Cashier’s Office to determine the cause. If it was an application error, it will be corrected by the cashier, however, if the unapplied cash amount is due to a duplicate payment, then the amount will be refunded to the customer.
When a payment results in unapplied over payment, the Cashier’s Office will reach out to the department for further discussion. If the payment was intended for an open invoice that was not provided by the customer, the department will be required to request customer approval in order for that overpayment to be applied to the open invoice. At this time, the customer should be made aware of the importance of listing all invoices if they are sending one check payment to cover multiple invoices. If the overpayment was intended as an advanced payment, the department will be notified that this balance should be moved into a separate prepaid/deferred balance sheet account, in which the department will be responsible for tracking. Once this is determined, an email should be sent to General Accounting and the Cashier’s Office indicating the account where the payment should be transferred.
Section 4: Account reconciliation:
Insert responses to Section 4questionsbelow:
Refer to the AR aging review guide prepared by A&FS to document the detailed procedures being performed by the department. Sample of expected documentation is as follows:
At the end of each month, the AR Aging Report (KFS) (FIS409) is comparedto the Balance Summary report (FIS1) to ensure the total balance matches. If the balance doesn’t match, a reconciliation is prepared to identify the reconciling items. Reconciling items are investigated and listed individually either on the reconciliation or attached as a supplemental schedule. For individual reconciling items in excess of 5% of the total AR balance, supporting documentation is attached to the reconciliation, validating the item is appropriate and is a true reconciling item (i.e., a timing difference) or if an adjustment isnecessary.
At the end of each month, AR balances by customer are reviewed to ensure the customer transactions are valid and accurate and that the customer’s balance is collectible.
The monthly reconciliation is prepared by ______and reviewed by ______.
Section 5: AR aging analysis, write offs,and allowance for doubtful accounts:
Insert responses to Section 5 A.questions below:
Refer to the AR aging review guide prepared by A&FS to document the detailed procedures being performed by the department. Sample of expected documentation is as follows:
At the end of each month,the department analyzes the AR aging report. As all invoices are due and payable upon receipt, after 30 days, invoices are considered past due and the department begins to follow-up with the customer to ensure collection. Note: Government customers are granted a longer grace period, per the Collections section of the KFS AR Process Overview. For non-governmental customers, the first dunning notice is sent when the invoice is 60 days past the invoice date, at 90 days past the invoice date,the second dunning notice is sent and at 120 days past the invoice date, the third and final dunning notice is sent.
After 150 days, the customer balance (or specific invoice amount) is sent to the collection agency and in conjunction, the amount is writtenoff. The department’s collection efforts are detailed in the write-off document, including the related conclusion for determining the write-off. Once an account or invoice has been written off, the departmentmay elect to continue collection efforts and if any payments are received as a result, they are recorded at that time.
In KFS, write-off documents route to the Fiscal Officers/any applicable Organization Review hierarchies for review and approval. If the write-off is for $50 or more, the document will also route to A&FS for approval.
Further information on processing write-offs in KFS can be found in the following link:
Insert responses to Section 5 B.questions below:
Section 6: Credit memos:
Insert responses to Section 6questions below:
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