Policy No. 608
Area: Finance Department
Description: Accounts Receivable Management
Accounts receivable is a significant asset for the college. Accounts receivable must be carefully managed to ensure efficient and effective collection of all debts owed to the college.
Debt: Any amount greater than zero owed to the college, including, but not limited to debts for tuition, fees, loans, and sales of goods and services.
Debtor: An individual, business, non-profit organization, or any other public or private entity including a state, local, or federal government, or a Native American tribe, that is liable for a debt or against whom there is a claim for a debt.
Accounts Receivable: Any obligation arising from a consumer transaction. Accounts receivable are the result of various types of financial transactions including, but not limited to, student tuition, fees, continuing education open enrollment courses, and library and parking fines, as well as sales of products and services to the general public.
Accounts Receivable Correction: An accounts receivable correction is due to an account that has been canceled or adjusted because the College is not entitled to collect the money.
Account Write-offs: Accounts that have been determined to be uncollectible and placed in inactive status. This does not eliminate the legal obligation to pay.
Student: An individual is considered a student once the Admissions Office has processed their application for admission, including any person who enrolls in any credit or noncredit course offered by the college.
Hold: The process by which the college prevents defined, future student activity.
Management of Receivables
The college will establish a tuition due date for each semester. Those students who have not been deferred or paid by this date will be dropped out of their classes. The college will also process a drop for non-payment after the last day of drop/add for the semester. Additional drops for non-payment may be performed at the discretion of the Dean of Administration and Finance or designee.
The college must have written policies and procedures, and a system of internal control for managing the accounts receivable process. Written procedures should include at a minimum:
• Requirement for establishing and recording a receivable.
• Collection actions and timeline for the collection process.
• Requirements for placing holds on student records.
• Approvals for adjustments to accounts.
• Periodic review of past due accounts.
• Criteria for referral to collection agency
• Process for referring to collection agency
• Criteria for writing off accounts and approvals needed.
• Process for restoring a previously written-off account and recording receipt of payment.
All accounts receivable activities undertaken should be documented in writing.
Subpart A. Establishing the receivable
It is the responsibility of the college to establish the terms and conditions for payment at the time an account is created. The debt must be acknowledged by the student or other debtor at this time. The acknowledgement must be either in writing or, with automated registration processes, by a positive action that indicates that the debtor is accepting the terms and conditions for payment.
The receivable must be entered into the SIS (student sub-ledger) at the time the account is first established, subject to Board of Trustees approval of tuition and fees.
Subpart B. Collection Activities
The college will follow up routinely and diligently on all accounts receivables. Written procedures and guidelines should be developed for collection activity, including determination of balances below which only minimal collection activity is required. A structured timetable for collection activities should include, at a minimum:
• Time frame for placing a hold on the student records.
• Time frame for contacting departments generating non-tuition/fee revenues regarding past-due receivables.
• Referral to a collection agency , including notification that the account is being referred to an outside collection agency.
All collection activity undertaken for each account should be documented in writing and as appropriate, recorded in SIS.
Subpart C. Billing
Students may view their account online, and paper invoices are issued on a routine basis.
The college shall mail a uniform printed invoice to the debtor at least 20 days before referral to any collection agency. The invoice shall be uniform in content and appearance across all college departments.
Subpart D. Hold Placed on Student Records
The college shall place a registration and official transcript hold on all unpaid student accounts with balances that are past due. This requirement applies to balances due under a payment plan unless the college has 1) developed a process for identifying students with a current payment plan balance, and 2) exempting such students from the automated hold process, and 3) dropping registration for any exempted student delinquent in making the subsequent payment.
Subpart E. Current Receivables
Current term receivable activity should be reviewed monthly but no less than once each semester by the Dean of Administration and Finance or designee.
Subpart F. Past Due Receivables
Past due accounts should be reviewed monthly by the Dean of Administration and Finance or designee.
The college should on a quarterly basis but no less than annually:
• Age all accounts receivable amounts.
• Review all accounts receivable that are one year or more past due for write-off.
• Calculate an estimate of uncollectible accounts receivable amounts.
Subpart G. Writing-Off Uncollectible Accounts
The Dean of Administration and Finance or designee must periodically, but no less than annually, review all past-due accounts receivable. Accounts receivable deemed to be uncollectible based on internal policies and procedures must be written off in the college’s accounting system and are no longer recognized as accounts receivable for management and financial reporting purposes. The Business Office will prepare the list of uncollectible accounts for approval by the Dean of Administration and Finance.
A clear distinction must be made between canceling accounts receivable and writing off accounts receivable.
Accounts receivable can be canceled or adjusted when 1) the institution is not entitled to collect the money, or 2) the debtor qualifies for a waiver or refund. Accounts receivable must not be canceled to avoid write-off procedures.
The college must make every reasonable effort to collect an account before a write-off. In most cases, the collection effort should include written notices, attempted phone contact, and referral to a collection agency.
Writing off an accounts receivable is sensitive and should therefore be subject to strong internal accounting controls. All write-offs of uncollectible accounts receivable require the approval of the Dean of Administration and Finance or designee.
When a debt is determined to be uncollectible, the debt shall be written off from the financial accounting records and is no longer recognized as an account receivable for financial reporting purposes. A debt is considered to be uncollectible when it meets one of the following criteria:
1. All reasonable collection efforts have been exhausted.
2. The cost of further collection action will exceed the amount recovered.
3. The debt is legally without merit or cannot be substantiated by evidence.
4. The debtor cannot be located.
5. The available assets or income (current or anticipated) are insufficient.
6. The debt was discharged in bankruptcy.
7. The applicable statute of limitations for collection of the debt has expired.
8. It is not in the public interest to pursue collection of the debt.
9. The debt has been compromised in the best interests of the state.
Determining that the debt is uncollectible does not cancel the legal obligation of the debtor to pay the debt, except as under criteria 3, 6, and 9.
Subpart H. Restoring the Previously Written-off Receivable
Payment against a written-off accounts receivable should be accepted by the college. The payment must be recorded in SIS and funds deposited to the appropriate accounts. Reinstatement of all previously written-off accounts receivable requires periodic review of the Dean of Administration and Finance or designee.
Subpart I. Referral to Collection Agency
Accounts receivable that the college is unsuccessful in collecting and are 121 days past due or thirty days after the final class registration period has concluded for the following semester, whichever is later, may be referred to a collection agency. The college should refer debts with such necessary information including debt type, debtor name, date of debt origination, and amount of debt.
This requirement does not apply if there is a dispute over the amount or validity of the debt, if the debt is the subject of legal action or administrative proceedings, or if the college determines that the debtor is adhering to acceptable payment arrangements.
The college is required to send notice to the debtor by U.S. mail or personal delivery at the debtor’s last known address at least 20 days before the debt is referred to any collection agency. The notice must state the nature and amount of the debt, and identify to whom the debt is owed.
The college should discontinue any billing statements, demand letters, or active collection efforts for referred debts.