Financial Policies

FN02 Billing and Accounts Receivable

Policy Status

Active

Subject Matter Expert

Treasury Operations, TreasuryGroup@PennStateOffice365.onmicrosoft.com

Policy Steward

Associate Vice President for Budget and Finance & Controller

Purpose
Scope
Definitions
Policy
Non-Compliance
Violations
Further Information
Cross References
Policy Status
- Most Recent Changes
- Revision History

Purpose

This policy establishes The Pennsylvania State University’s (“University”) requirements for billing external customers and recording accounts receivable resulting from goods supplied or services rendered. The policy promotes:

Consistent financial practices
Strong internal controls
Compliance with federal, state, tax, and payment card regulations
Timely collection and reporting
Reduced financial and reputational risk

Scope

All University personnel involved in financial, accounting, contracting, payment acceptance, or revenue-generating activities must comply with this policy.

Contributions that are processed through Development and Alumni Relations are not covered by this policy. For guidance on these contributions, see Policy FN03 Accountability for the Receipt of Contributions from Non-Governmental Sources.

Penn State Health or its subsidiaries and The Pennsylvania College of Technology, each having their own financial policies, are exempt from the requirements of this policy.

Definitions

Accounts Receivable: Legally enforceable claims for amounts owed for goods supplied and/or services rendered.
Credit Memo: A document reducing a customer’s obligation on a previously issued invoice.
Dunning: Structured communications used to collect overdue accounts.
External Payment Processing System: A third-party service that enables businesses to accept payments from customers.
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.
Payment Card Industry Data Security Standards (PCI DSS): A mandatory, global security framework designed to protect sensitive cardholder data during processing, storage, or transmission, thereby reducing credit card fraud. It applies to all entities – merchants and service providers – that handle major card brands.
Write-offs: Amounts deemed uncollectible after exhausting all collection efforts.

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 to Bill and Maintain Receivables

The Senior Vice President for Finance and Business has authorized the following to bill and maintain receivables:

Bursar - Student receivables
Treasury/Central Accounts Receivable - Non-student receivables
Office of Research Accounting - Sponsored receivables

Units not authorized must process receivables through Central Accounts Receivable.

Authorized units must maintain documented procedures, quality standards, and internal controls.

Operational requirements for non-student receivables are contained in Procedure FN2065 Non-Student Accounts Receivable. Operational requirements for sponsored award receivables are contained in Procedure RA2062 Sponsored Award Accounts Receivable.

Billing Requirements

All invoices must:

Be issued promptly (within 10 business days of goods/services being rendered unless documented otherwise).
Contain all mandatory elements (see “Required Invoice Elements” below).
Use U.S. currency unless approved by Treasury.
Comply with federal, state, sponsor, tax, and grant regulations.
Use approved cost collectors.

Required Invoice Elements

At a minimum, each invoice must include:

Unique invoice number
Customer legal name and address
Customer tax ID, if required
University remittance details
Payment terms
Description of goods/services
Itemized charges
Contract or purchase order reference, when applicable
Contact information

Rate-Setting Requirements

Units selling goods or services must maintain a documented, approved rate schedule that:

Uses cost-based pricing principles
Incorporates direct and indirect costs appropriately
Aligns with Uniform Guidance for recharge/service centers
Prevents subsidization of external customers
Is reviewed at least annually
Is approved by the Associate Vice President for Budget and Finance & Controller when required by Policy FN26 Institutional Rates and Fees

Units must retain all supporting documents used to justify rates.

Contracts for Goods and Services or Sponsored Awards

A written agreement is required before billing external customers for:

Services
Rentals
Multi-year engagements
Agreements exceeding $10,000
Any activity with risk, liability, or compliance implications

Contracts must be routed through the appropriate University contracting office.

Credit Management

Units should evaluate customer creditworthiness before extending credit for:

High-value invoices (>$100,000)
Multi-year transactions
High-risk customers
International partners

The University may require:

Prepayment
Deposits
Partial payments in advance
Shortened payment terms

Tax Compliance

Units must comply with:

Pennsylvania sales tax requirements
IRS rules governing taxable services
Unrelated Business Income Tax (UBIT)
Use tax obligations
Exemption certificate retention requirements

The University may not waive legally required taxes.

International Customers

Units must ensure compliance with:

Office of Foreign Assets Control (OFAC), a division of the U.S. Department of the Treasury and export control regulations
Foreign tax rules
Currency acceptance rules
International credit risk evaluations

Payments from sanctioned countries are prohibited without explicit authorization.

Collection of Accounts Receivable

Collection Practices Include

Standard payment methods (ACH, wire, check, e-check, credit card)
Dunning communications at 30, 60, and 90 days
Referral to external collections after 120 days
Legal action as needed

Collection Activities Must Follow Internal Control Standards

Segregation of duties
Independent review
Timely reconciliation

Dispute Resolution

Customers must notify the University within 30 days of invoice date
Units must acknowledge disputes within five (5) business days
Resolutions must be completed within 30 days, unless extended with written justification

Credit Memos

Required for all invoice adjustments
Must include full justification and supporting documentation
Must follow segregation-of-duties requirements

Write-Offs

Uncollectible amounts will be written off using a credit memo that reverses the original accounting entries.

Write-offs are permitted only after:

All internal and external collection efforts are exhausted,
The account is evaluated for potential fraud,
Dispute processes are completed.

Write-off approvals must follow a tiered structure:

Up to $5,000: Accounts Receivable unit manager
$5,001–$25,000: Director of Treasury/Accounts Receivables unit
Over $25,000: Associate Vice President for Budget and Finance & Controller or designee

Allowance for Doubtful Accounts

Authorized units must calculate and maintain an allowance for doubtful accounts consistent with Generally Accepted Accounting Principles (GAAP) and University financial reporting standards.

Allowance methodologies must be documented and include:

Aging categories
Historical collection rates
Specific account risk factors

Adjustments to the allowance account must be reviewed and approved quarterly.

Refunds and Overpayments

Overpayments must be refunded within a reasonable timeframe unless designated for future service credit or explicitly requested otherwise by the customer (if allowed).

Refunds must be issued using the same payment method used for the original transaction, unless restricted by PCI-DSS or banking regulations.

Documentation must be retained to support the refund.

Reporting and Monitoring

Authorized receivable units must:

Prepare receivable aging analyses on a regular basis
Monitor overdue accounts and accounts requiring follow-up
Support internal audits to ensure compliance and accuracy

Authorized receivable units must conduct:

Monthly ledger reconciliations
Monthly aging analysis
Quarterly review of delinquent accounts

Units must retain Accounts Receivable documentation in accordance with University records retention schedules.

Units must comply with internal audit and external audit requests.

Performance Standards

Authorized units must adhere to:

Invoice issuance within 10 business days
Monthly reconciliation of all accounts
Monthly aging analysis
Quarterly review of delinquent accounts

Security and Compliance Requirements

All payment processing activities involving credit cards must comply with PCI-DSS. Policy FN07 Electronic Payments: Credit Cards contains complete details.

All recordkeeping must comply with state record retention laws and federal regulations, including 2 CFR 200 Uniform Guidance for sponsored program receivables.

Fraud Prevention and Internal Controls

The University maintains internal controls over billing, payment processing, collections, and accounts receivable reporting to protect University assets and ensure the accuracy and integrity of financial records.

All units involved in billing and accounts receivable activities must follow established internal control standards, including:

Segregation of duties between billing, payment processing, adjustments, and write-off approvals whenever possible
Independent review and approval of credit memos, refunds, and write-offs
Timely reconciliation and monitoring of accounts receivable balances
Secure handling of payment information in accordance with applicable security standards, including the PCI-DSS
Retention of supporting documentation for all accounts receivable transactions

Units must take reasonable steps to prevent and detect fraudulent or improper activity related to billing or accounts receivable processes.

Suspected fraud, misuse of receivable processes, or irregular financial activity must be reported immediately to the appropriate supervisor, Director of Treasury/Accounts Receivable for non-student receivables, Director of Research Accounting for sponsored award receivables, or Internal Audit.

Failure to maintain appropriate internal controls or to follow established procedures may result in corrective action or loss of authority to manage accounts receivable activities.

Exclusions

Requests for exclusion from using Central Accounts Receivable will be considered only when:

Contractual obligations require separate handling
Regulatory requirements mandate independent receivables management
System limitations prevent integration

Requests must be submitted to Central Accounts Receivable and are subject to annual review. Renewals are not automatic.

There is no exclusion process for Bursar or Sponsored Awards receivables.

Roles and Responsibilities

Bursar

Manages billing, payment processing, collections, and reporting for student receivables
Ensures PCI-DSS compliance for student payment processing
Administers student account dispute resolution
Allowance Management

Office of Research Accounting

Manages billing, payments, credit memos, collections, and reporting for sponsored program receivables (see 2 CFR 200 Uniform Guidance for federal receivables requirements)
Ensures compliance with Uniform Guidance for sponsor billing
Manages federal and non-federal sponsor disputes and closeout timelines
Allowance Management

Treasury/Central Accounts Receivable

Manages billing, payments, credit memos, collections, and reporting for non-student receivables
Sets standards for collection practices
Oversees PCI-DSS compliance for accepting card payments
Allowance Management

Non-Compliance

Units must comply with the policy as a condition of operating authority.

Non-compliance may result in:

Withdrawal of unit billing privileges
Corrective actions imposed by central finance
Referral to internal audit

Intentional misuse of billing or receivables processes may result in disciplinary action under applicable University policies.

Violations

Violations of University policy should be reported to the appropriate supervisor, unit manager, Human Resources representative, or the office responsible for the relevant policy or procedure. If these channels are insufficient or unavailable, individuals may submit an anonymous report through the Penn State University Hotline, accessible via the Reporting at Penn State website.

May 28, 2026 - policy revised to define the finance shared services business model:
- Improved readability and usability for a broad University audience
- Ensure policy content remains stable, durable, and principle-based
- Relocate operational details to Procedure FN2065 and RA2062 where updates can occur without frequent policy revisions
- Strengthening alignment with internal controls, audit expectations, and risk management practices
- Support ongoing financial system modernization and future operational changes

Revision History

May 5, 2026 - Editorial changes - Procedure FN2005 Processing Cash Revenues renumbered to FN2001 to align with Policy FN01 Cash Revenues. All hyperlinks updated
February 24, 2026 – Editorial changes:
- Temporary statement regarding the new finance shared services business model impacting policy revisions added
- Financial Officer references changed to Strategic Finance Partner teams
March 11, 2025 - Editorial changes - website source code changes - definition tag formatting.
December 7, 2023 - Editorial changes. Procedure CR2005 was renumbered and retitled to FN2005 Processing Cash Revenues. All associated links were updated.
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
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 Center
November 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.

Date Approved

Thu, 05/28/2026 - 12:00

Date Published

Fri, 05/29/2026 - 12:00

Effective Date