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Payment Terms

When a department decides to sell goods or services to, or recover costs from, an individual or an external organization, it must also determine how the individual or organization will pay for these items. Will payment be required up front via cash, cheque, credit card or debit card? Will credit be granted? Will the department receive payment by wire transfer? This section covers the guidelines in this area.


Payment upon delivery

Departments should require payment upon delivery whenever a transaction falls into the category of a “retail” transaction which is routinely paid for in cash, personal cheque or debit/credit card at the time of delivery. This eliminates the risk of a bad debt and the costs associated with providing credit.

Payment in cash at the time of delivery (or payment via debit card / credit card if such facilities exist in the department) should always be requested for small transactions, i.e. $100 or less, because of the disproportionate administrative cost of processing customer invoices.


Personal cheques
Acceptance of personal cheques carries a risk of NSF cheques. Departments should exercise caution in accepting personal cheques and should follow the normal retail practice of requiring identification in those cases where the customer is not known.

Debit cards or credit cards
As with cash, debit cards or credit cards eliminate bad debt risk. They carry the added benefit of minimizing cash on hand thereby avoiding the associated risks.

However, there are costs associated with debit cards or credit cards, including:

  • the cost of the credit card tele-deposit equipment / POS equipment;
  • commissions payable to the credit card companies / banks; and
  • the requirement to check for stolen credit cards.

Notwithstanding the associated costs, the volume and nature of a departmental operation may make acceptance of debit cards or credit cards a good business decision. If so, refer to the page Debit or Credit Card Facility for guidance and assistance in setting up a debit or credit card facility, for answers to frequently asked questions and for contact information.

Incoming wire payments
If payment is to be made via incoming wire transfer and a University of Toronto invoice will not be issued, refer to Incoming Wire Payments for information on processing. Note that if a University of Toronto invoice has already been issued by the department for the good/service/expense recovery, the customer should use the banking information specific to payment of accounts receivable invoices, and provide the customer invoice number on the payment advice, to ensure payments are applied efficiently against the invoice(s). The customer should contact the Supervisor, Accounts Receivable for more information.

Payment on Receipt of a University of Toronto Invoice

The Decision to invoice
After consideration of the alternative payment methods, the department may decide not to require payment at the time the service is rendered. Rather, the department makes the decision to issue an invoice to the customer with the standard payment terms of due upon receipt .

The decision to invoice rather than require cash on delivery is implicitly a decision to grant credit to the customer. It is important that selling departments be aware that there is a cost related to this decision as well as risks and ways of minimizing each.

Reducing credit costs
Whether a sale or cost recovery, the University is financing the expenditures related to the services provided until payment is received from the customer. The selling department can help to minimize this cost by:

  • issuing invoices promptly upon delivery of service;
  • issuing instalment invoices over the year, preferably with an advance at the beginning of the period. This is most appropriate in the case of expense recoveries, e.g. recoveries of a portion of salaries;
  • actively pursuing collection of accounts receivable (see Collection Responsibilities in the section Accounts Receivable, Collection Responsibilities and Uncollected Amounts)

Reducing risk of bad debts
With any credit transaction, there is a risk of not collecting payment, i.e. the bad debt risk. The risk of bad debts can be significantly reduced by following sound business practices, which include:

  • obtaining a signed agreement, i.e. work order, from the customer prior to providing goods or services. Through this practice, misunderstandings about the nature and cost of the service can be avoided. Such misunderstandings are frequently the cause of collection problems;
  • granting credit only to customers who have established their credit worthiness:
    • high profile customers with well established business reputations;
    • customers with whom the department has had successful previous dealings; and
    • government agencies.

An investigation of the credit status should be undertaken if there is any doubt about a potential customer’s credit worthiness. Normally this includes obtaining two business references, assessing such factors as the current state of the economy and, perhaps, contacting the prospective customer’s bank.

The Accounts Receivable Supervisor (978-6923) is available to assist in this matter and should always be contacted for credit approval where the value of the goods or services is expected to exceed $50,000.

Accounts Receivable, Collection Responsibilities and Uncollected Amounts
Refer to the section Accounts Receivable, Collection Responsibilities and Uncollected Amounts for guidelines surrounding processing U of T invoices, processing credit invoices, collection

Last revision: September 8, 2010