Accounts Receivable, Collection Responsibilities and Uncollected Amounts
Once the decision has been made to grant credit to a customer (see the Decision to Invoice sub-section on the Payment Terms page), this section covers the guidelines in the area of processing UofT invoices, accounts receivable, collection responsibilities and responsibilities for uncollected amounts.
Processing University of Toronto Invoices
Processing University of Toronto Invoices
For most invoices related to external income and external expense recoveries, the terms of payment are due upon receipt of invoice.
The University of Toronto invoice is used only for external customers. Refer to the section Internal Revenues and Internal Expense Recoveries for processing charges to internal customers.
If you are uncertain as to whether a customer is external or internal, refer to the sections External Revenues and External Expense Recoveries and Internal Revenues and Internal Expense Recoveries for definitions, or consult with your FAST Team Representative.
The University of Toronto invoice (i.e. accounts receivable invoice) is a legal business document. It is important to complete it in a professional manner. It should be noted that the manner in which the invoice is prepared can impact on the ability to collect the account.
Both the CAD Accounts Receivable invoice and USD Accounts Receivable invoice can be found online.
Important points to remember when completing the accounts receivable invoice:
- Invoice Number
- Each department is assigned an invoice number series by the Financial Services Department and is required to maintain a log of the specific invoice numbers issued by the department. The invoice number has seven digits including an alpha prefix. Departments should account for all invoice numbers issued in their designated series;
- It is important to avoid issuing duplicating invoice numbers to customers;
- These numbers should continue indefinitely. The Accounts Receivable Department should be notified in writing of a change.
- Details on the invoice
- A specific description of the goods or services delivered to the customer should be provided on the invoice.
- There should be sufficient detail such that:
- the customer has no difficulty identifying the purpose of the invoice;
- the described items or services agree to the customer purchase order or work order. The customer’s authorization for any changes to the original work order should be referenced;
- the charges should be referenced to the selling department’s final quote as communicated to the customer, e.g. as per quote dated…
- Tax Code
- If the accounts receivable invoice includes two items, each with different tax rate applications, then a different tax code should be used on each line of the invoice;
- Examples of University sales that are taxable, or those services which are zero-rated or exempt from HST, can be found on the HST-University Sales page. These are examples only, and it may be necessary to refer to the Goods & Services Tax Manual or for more information on HST, please contact your FAST Team Representative.
- All invoices to external clients must indicate the University of Toronto HST registration #R108162330.
Invoices to external customers should be issued in 4 parts and distributed as follows:
- Original invoice – to customer
- Remittance copy – to customer
- Financial Services copy – to accounts receivable department (215 Huron St, 2nd floor)
- Department copy – retained by the originating department.
Both of the Canadian and USD Accounts Receivable Invoice forms are used for invoices and credit invoices.
A credit invoice should be used whenever an original invoice needs to be reduced or cancelled because:
- the customer did not receive the goods or services, or
- the invoice was issued in error.
A credit invoice is also required if an invoice payment was deposited directly to a departmental revenue account in error.
Note: Payments of University of Toronto invoices must be processed against the customer’s account. They must not be credited to the originating department’s income or expense recovery accounts which were already credited when the invoice was originally processed. If an error is made, a credit invoice should be issued immediately to cancel the original transaction in order to avoid overstating revenues.
Important Points to Remember:
- It is important to have control over the issuance of credit invoices. Approval by the head of the department must be indicated by signing the departmental copy of the invoice.
- When an invoice is being cancelled and is to be replaced by a new invoice, the Details section of the new invoice should include a reference to the original invoice number. Do not use the original invoice number for the new invoice.
- Do not distribute any invoice copies to the customer when issuing a credit invoice which is only intended to correct internal records, e.g. where a payment has been incorrectly processed.
The selling department is responsible for the collection of amounts due. Note that the Accounts Receivable section in the Financial Services Department does not contact customers, or otherwise pursue outstanding accounts receivable. However, if a collection agency is required, the Accounts Receivable Supervisor can provide assistance in their selection.
The selling department:
- is responsible for following up on all unpaid invoices issued to all delinquent customers, 45 days after the invoice date. This would normally include resending a copy of the invoice and phoning the customer;
- A final demand notice should be issued by the selling department 60 days after the invoice date.
If the amount is not collected within six months from the date of the original transaction, the amount will be charged back to the selling department.
Chargebacks = lost revenue
The selling department should work to avoid chargebacks by taking a proactive approach before this stage. This begins with prompt attention to the Dept: A/R Open Item Aging Report report which can be run at any time for any cut off date. Special attention should be given to accounts in the 90-days-and-over categories.
The selling department should act promptly in contacting delinquent customers. The Accounts Receivable Supervisor is available to provide assistance and, as a general rule, should be contacted so that collection efforts can be co-ordinated.
Use of Collection Agencies
When departmental collection efforts fail, the customer account should be referred to an outside collection agency. The Accounts Receivable Supervisor will obtain approval from the originating department prior to referring an account to a collection agency. All costs involved in the collection of a past due account are borne by the originating department. These charges are approximately 25% of the outstanding balance.
As noted above, amounts which are not collected from customers are charged back to the selling department.
“Chargebacks” for uncollected accounts receivable include the following:
- Small amounts representing differences between payments received and the amount of the original invoice, generally less than $100, which are cleared to the department’s accounts without prior consultation; and
- Amounts outstanding after six months from the date of the invoice.
At the time the amount is charged back, an email is sent to the selling department which includes:
- the invoices and amount(s) charged back, and
- a recommendation that a collection agency be engaged to collect the outstanding invoices.
If amounts charged back to the selling department are subsequently recovered, they will be credited to an appropriate departmental account.
Last revision: Jan 29, 2013