Procedure: 401-A/R, Invoicing, Collections
Collection Agency Referral & Write-offs
The method used for collection agency referral and write-offs depend on the balance due and if the department has a collections delegation agreement. The impact of the balance due and the delegation agreement are discussed in more detail in the upcoming sections.
If a department has a significant number or frequent unpaid accounts, the department representative may find it more beneficial to directly handle the collections effort. Any department wishing to work directly with the collection agency may do so by signing a delegation agreement with Accounting Services. This agreement identifies the specific responsibility of the department and Accounting Services. Departments interested in pursuing a delegation agreement should contact the Cash Management Section of Accounting Services.
Non-Delegated and Delegated Department (Less than $50)
The department bears the responsibility for any unpaid or past due account with an outstanding balance of less than $50. The department should make sure that some collection efforts have been made. The extent of those efforts, as stated earlier, depends on the unpaid amount and the likelihood that the efforts will result in subsequent payment. In general, it is not cost-effective to refer these accounts to a collection agency. Therefore, if the department determines receipt of a payment is unlikely then the department may write-off the invoice.
Non-Delegated Department (Greater than $50)
If follow-up procedures fail to result in collection of an account it should be turned over to a collection agency or written off as uncollectible. According to FPPP #39 the write-off must be approved by someone not directly associated with either the billing or the collection efforts. Departments without a delegation agreement must refer the account to Accounting Services for write-off or referral to a collection agency. Any account forwarded to Accounting Services must be attached to the completed referral form. The billing department will be notified of the action taken on these accounts.
Delegated Department (Greater than $50)
The following chart represents a summary of each department's responsibility to follow-up and collect on outstanding balances. Each tier is discussed in more detail below the chart.
Balance due |
Follow-up call and letters |
Contact with Collection Agency |
Write-off responsibility |
|---|---|---|---|
| Less than $50 | Department | Department (not recommended) | Department |
| $50-$200 | Department | Department | Department |
| $200-$1000 (referred to collection agency) |
Department | Department | Department |
| $200-$1000 (not referred to collection agency) |
Department | N/A | Accounting Services |
| Greater than $1000 | Department | Accounting Services | Accounting Services |
If follow-up procedures fail to result in collection of an account it should be turned over to a collection agency or written off as uncollectible. According to FPPP #39, the write-off must be approved by someone not directly associated with either the billing or the collection efforts. The following guidelines show what steps should be taken.
- Between $50 and $200
The department is responsible for any follow-up for an unpaid or past due account with an outstanding balance between $50 and $200. The department should send a full sequence (3) of collection letters, make or attempt telephone contact and place a records hold, if appropriate.
If the above steps fail to produce a payment, the delegated department may write-off the debt or refer the account to a collection agency.
- Between $200 and $1000
The department is responsible for any follow-up for an unpaid or past due account with an outstanding balance between $200 and $1000. The department should send a full sequence (3) of collection letters, make or attempt telephone contact. The department may place a records hold, if appropriate.
The delegated department may refer the account to a collection agency. If the collection agency returns the account as uncollectable the delegated department may write-off the account. If the department decides to write-off the account without referring it to the collection agency, the department must refer the account to Accounting Services for write-off. Any account forwarded to Accounting Services must be attached to a completed referral form.
- Greater than $1000
The department is responsible for any follow-up for an unpaid or past due account with an outstanding balance greater than $1000. The department should send a full sequence (3) of collection letters, make or attempt telephone contact. The department may place a records hold, if appropriate.
If the above steps fail to produce a payment, the department must refer the account to Accounting Services for write-off or referral to a collection agency. The records for any account forwarded to Accounting Services must be attached to the completed referral form. The billing department will be notified of the action taken on these accounts.
Procedure: 401-A/R, Invoicing, Collections