FN02 Billing and Accounts Receivable

Contents:

• Purpose
• Scope
• Definitions
• Policy
  • Authority
  • Billing Terms
    • Areas of the University NOT Authorized to Maintain Accounts Receivables
    • Areas of the University Authorized to Maintain Accounts Receivables
• Credit Memos/Adjustments/Reversals
• Delinquent Account Procsssing
• Further Information
• Cross References
• Revision History
  • Most Recent Changes
  • Revision History

PURPOSE:

This Pennsylvania State University (“University”) policy outlines the University's policy on the billing and recording of Accounts Receivable for sales to external (non-University) customers for goods and/or services.

See Policy FN14 Use of University Tangible Non-Capital Property, Capital Property, Supplies, and University Services for services that are applicable for University billings. Refer to Policy FN16 Obtaining Goods and/or Services From Other University Departments for interdepartmental billings, and Procedure FN2066 Accounts Receivable. For credit card charge sales, see Policy FN07 Electronic Payments - Credit Cards.

SCOPE:

The University’s financial policies are applicable throughout the University, including all direct and indirect subsidiaries, and are required to be followed by all University employees who engage in financial, accounting, purchasing or other transactions, including University employees who in the course of their assigned duties engage in such transactions on behalf of third parties such as the Penn State Alumni Association or other related entities. The University’s financial policies are not applicable to Penn State Health or its subsidiaries, or to Penn College of Technology, each of which has its own financial policies.

DEFINITIONS:

• Accounts Receivable - The amount of money owed to the University for goods and/or services that have been delivered or provided to outside parties. The amount should be recorded as an asset and the associated revenue recognized in the proper fiscal period. Amounts owed by other departments are NOT considered as accounts receivable for financial statement purposes because these funds will remain within the University. Advances extended to faculty and staff, and credit extended to outside customers are receivables.
• Allowance for Doubtful Accounts - An estimate of the accounts receivable that will not be collected.
• Generally Accepted Accounting Principles (GAAP) - a common set of accepted accounting principles, standards, and procedures that companies and their accountants must follow when they compile their financial statements.
• Write-offs - Accounts receivable amounts that are deemed uncollectable and removed from accounts receivable, once all collections efforts have been exhausted.

POLICY:

University departments, having received approval to manage their respective accounts receivable system, are responsible for invoicing and collecting monies due for sales and services provided to non-University customers. If the department is selling a tangible or taxable item, refer to Policy FN33 Sales and Use Tax and Procedure FN2033 Collecting and Remitting Sales and Use Taxes.

AUTHORITY:

All areas of the University have the inherent authority to bill for materials and services rendered provided that published University criteria are followed. However, the authority to maintain accounts receivable and collect payments on such receivables is granted only when there is a justifiably compelling reason to do so.

Several areas are granted an inherent right to maintain receivables. They are:

• Bursar (student receivables),
• Central Accounts Receivable (general receivables, managed by Accounting Operations),
• Office of Research Accounting (receivables for sponsored activity),
• University Health Services, and
• College of Medicine.

Other areas may be granted a conditional right to maintain receivables by their budget executive, Financial Officer, and approved by the Associate Vice President for Budget and Finance.

The University has established general basic minimum performance criteria applicable to any area granted the authority to maintain its own receivables. These criteria appear in the University Procedure FN2066 Accounts Receivable, which indicates the steps to be taken to procure the authority to maintain accounts receivables.

BILLING TERMS:

All invoices must have billing terms stating, ‘net payable upon receipt.’

All payments to the University should be in U.S. dollars. See Policy FN01 Cash Revenues and Procedure CR2005 Processing Cash Revenues for details when a foreign check is presented as payment.

Dunning occurs 30, 60, and 90 days after the invoice date. Any exceptions must be submitted for approval, in writing, to the Controller. This exception request must state why the exception is needed and if the request is for a single vendor or the entire business area. After consideration by the Controller, the Associate Vice President for Budget and Finance grants final approval.

Areas of the University NOT Authorized to Maintain Accounts Receivables

For areas of the University which have NOT been authorized to maintain its own accounts receivable, all materials and permitted services (per Policy FN14 Use of University Tangible Non-Capital Property, Capital Property, Supplies and University Services) that are sold on a charge sale basis must be billed via Central Accounts Receivable. See Procedure FN2066 Accounts Receivable for complete details.

Areas of the University Authorized to Maintain Accounts Receivables

For areas which HAVE been authorized to maintain their own receivables, all materials and permitted services sold on a charge sale basis must be billed on an invoice meeting the requirements delineated in Procedure FN2066 Accounts Receivable.

Receivables and associated revenue must be recorded at the time the goods and/or services have been provided and not at the time the payment is received. Departments must have appropriate internal controls when working with accounts receivable.

CREDIT MEMOS/ADJUSTMENTS/REVERSALS:

Any adjustment or change to an existing invoice (credit memo, adjustments, or reversals) should be adequately documented and justified, to provide a complete audit trail.

See Procedure FN2066 Accounts Receivable for details on processing credit memos, adjustments, and reversals.

DELIQUENT ACCOUNT PROCESSING:

Business Areas, the Bursar (student receivables), Central Accounts Receivable (general receivables), the Office of Research Accounting (receivables for sponsored activity), University Health Services, and the College of Medicine have a shared responsibility to monitor and follow a regular collection schedule with appropriate escalation actions for those not paid in full according to established billing terms. See Procedure FN2066 Accounts Receivable Delinquent Account Processing subsection for complete details on collection processes.

Any outstanding balance, regardless of the billing system, may be referred to either the Office of General Counsel (OGC), or collection agencies if not resolved in a specified period. Fees paid to collection agencies will be deducted from any monies collected from the customer.

FURTHER INFORMATION:

For questions, additional detail, or to request changes to this policy, please contact the Controller, within the Office of Budget and Finance.

CROSS REFERENCES:

• Policy FN01 Cash Revenues
• Policy FN07 Electronic Payments - Credit Cards
• Policy FN14 Use of University Tangible Non-Capital Property, Capital Property, Supplies and University Services
• Policy FN16 Obtaining Goods and/or Services From Other University Departments
• Policy FN27 Establishing and Billing Service Center User Rates
• Procedure FN2066 Accounts Receivable

REVISION HISTORY:

Most Recent Changes:

• April 14, 2023 – Policy rewritten to address new Central Accounts Receivable process:
  • Title changed from FN02 Charge Sales and Billing to FN02 Billing and Accounts Receivable
  • Subject Matter Expert changed from Director of Accounting Operations to Controller
  • Purpose section: The Pennsylvania State University replaced “the University’s” verbiage to clarify the owner of the policy.
  • New sections added:
    • Scope
    • Definitions
    • Policy
      • Authority section: The second paragraph amended to indicate the following:
        • The Bursar is responsible for student receivables.
        • Central Accounts Receivable added for “general receivables.”
        • Financial Officers at Non-University Park locations were removed from the inherent list because they should now be utilizing Central Accounts Receivable.
        • Penn State Health Finance Office was removed because they have their own policies.
        • University Health Services and College of Medicine were added to the list.
      • Billing Terms:
        • Added the dunning paragraph.
      • Credit Adjustments
        • The title of the section changed from Credit Adjustments to Credit Memos/Adjustments/Reversals and all information within the subsection was updated to reflect current processes

    Revision History:

    • January 5, 2023 – Editorial changes. Changed all references to the Office of the Corporate Controller to the Office of Budget and Finance, per the directive of the Associate Vice President for Finance. Subject Matter Expert (Director, Accounting Operations) added
    • September 2, 2022 - Editorial change to change Policy Steward from Associate Vice President for Finance and Corporate Controller to Associate Vice President for Finance.
    • January 21, 2019 - Editorial change - Penn State Health replaced Hershey Medical CenterNovember 8, 2018 - Subject Matter Expert added.
    • September 20, 2018 - Editorial changes to update the GURU hyperlinks from html formatting to cfm format.
    • September 10, 2018 - Editorial changes to update the Cross References section and to remove redundant Date Approved, Date Published, and Effective Date information
    • September 23, 2014 - Revision to the AUTHORITY section, adding the Office of Research Accounting as one of the areas which has an inherent right to maintain receivables.
    • September 25, 2013 - Editorial changes. Addition of policy steward information, in the event that there are questions or requests for changes to the policy.
    • February 11, 2013 - Revisions made to the GUIDELINES section to reflect the arrival of the Central Accounts Receivable Portal (CARP) for the billing of materials and permitted services for areas of the University which have NOT been authorized to maintain their own accounts receivable.
    • June 14, 2006 - Revision History added.
    • May 9, 2005 - Editorial changes to eliminate "General Forms Usage Guide" reference, correct link and verbiage for what form is to be used.
    • January 24, 2000 -
      • Major policy rewrite for better organization and for clarification;
      • New University billing terms of "net payable upon receipt";
      • Areas may now be granted a right to maintain receivables by their budget executive and Financial Officer rather than the Corporate Controller or designee (had been the Bursar);
      • Added cross references to other policies and procedures.
    • July 16, 1996 - Substantial revisions dealing with "A" invoices, "B" invoices and write-offs.
    • January 22, 1992 - Verbiage added to uncollectible charge sales clarifying when invoices are uncollectible.
    • May 11, 1989 - Campus Title changes. Policy renumbered and relocated from old "Cash and Sales" section (cash and sales section new called "Financial")
    • June 1, 1982 - Entire Policy revised.