Accounts Payable Internal Process and Policies for Payments

Direct Orders, Purchase Order Payments, and Direct Debits

Implemented February 2007

Updated November 2009

Updated March 2016

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Table of Contents

Background …………………………………………………3

Accounts Payable Standard Process……………………3

Direct Payments…………………………………………….3

Recurring Payments……………………………………….3

Distributed Directs – HFS Process………………………4

Libraries Process…………………………………………..4

Rush Payments……………………………………………..4

ARIBA PO Payments………………………..5,6

Payments to Foreign Entities………..…………………..7

Tolerance…………………………………..………………..7

Check Handling…………..………………………………...8

Payment Methods……………….…………………………9

Miscellaneous………………….…………………………...9

Additional Resources………….………………………...10

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Background
Procurement of goods and services occur in the following formats:

 Electronic procurement system (ARIBA)-a Purchase Order is created after an electronic

purchase requisition is approved and submitted to the vendor. The Purchase Order is
replicated in SAP.
 Direct orders outside of the electronic procurement system- an order is placed with a
vendor by a department. The vendor will send an invoice that is paid upon approval of a direct
invoice voucher.
 Department purchasing card order-an order is placed with a vendor by a department.
These orders should be charged to the ordering department’s purchasing card upon shipment
of the goods.

In the procurement model, a good or service is ordered at a predetermined or estimated price. When
the good is received or the service provided, payment is owed to the vendor. The vendor will provide
a bill for the good or service, which should be close to the price identified or estimated during the
requisition stage. When these conditions are met, the vendor’s bill should be paid.

Accounts Payable Standard Process

Once the Accounts Payable staff receives an invoice voucher, the goal is to have it processed with 48
hours, and paid according to the vendor’s payment terms.

Upon receipt, the AP clerk will:

 Check Invoice Voucher for accuracy and approvals
 Match invoice with vendor master data
o If new vendor, arrange for Master Data team to create one
 Key invoice into SAP system

Direct Payments
Non-PO Invoices via Direct Invoice Voucher (No purchase order, no encumbrance)
o Customer departments send completed Invoice Voucher – with supporting documentation
and approval signatures – to the Central Accounts Payable.
o Central Accounts Payable clerk will review for completeness, check vendor master data,
enter into system.
 If vendor master data missing, contact Vendor Master Data Team to set up.

Non-PO Invoices via ZV60

o Department will enter their invoices directly into SAP using Tcode ZV60
o Once the transaction is parked, a printout of the transaction will be stapled to the invoice (in
place of an invoice voucher).
o The printout will be routed for approvals.
o Once fiscal approval has been obtained, the printout and invoice will be sent to the Business
Office for review.
o Upon BO review, the printout and invoice are sent to Central Accounts Payable for posting.

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Non-PO Invoices via ZV60 Upload (Primarily Student Life will use this method)
o Student Life Business Office will enter invoices into Excel Spreadsheet template for ZV60
Upload
o Entries per upload should be limited to 20 invoices
o Once the transactions are parked, a printout of the transactions will be stapled to the invoice
(in place of an invoice voucher).
o Invoices should be stacked in document number order, with printout on top.
o The printout will be routed for approvals.
o Each document number will be approved with one signature on the printout, as long as
each document is within the signers’ comptroller delegation authority.
o If any document exceeds the signers’ comptroller delegation authority, it will be
forwarded to the next fiscal approver for review.
o Once fiscal approval has been obtained, the printout and invoice will be sent to the Business
Office for review.
o Upon BO review, the printout and invoice are sent to Central Accounts Payable for posting.

Recurring Payments
Payments can be set up to repeat on a specified schedule, for the same dollar amount each pay date.
Recurring payments are created via invoice voucher with the following information included:
 First Payment Date
 Last Payment Date
 Interval (Monthly, Weekly, Daily)
 Reference Information (Invoice number, etc)
 Recurring Amount

Rush Payments
Accounts Payable staff prioritize invoice vouchers that are clearly marked as “RUSH”. The goal is to
have rush payments processed within 24 hours of receipt of the voucher.
 Hand deliver rush check requests to Accounts Payable for vendor payments, or to the
Tax Department for personal payments.
 A completed DIV, including appropriate approvals and backup documentation is
required

Libraries Direct Invoice Voucher Process

o Libraries completes Invoice Voucher according to the following guidelines:
o Include Vendor Name and Address.
o Include Vendor Number (if known).
o Provide unique ‘Payable Number’ in Reference field (See Libraries naming convention list).
o Libraries will keep list cross referencing payable numbers with invoices paid.
o Central Accounts Payable will list invoice numbers on check stub (up to 50 characters). If not
enough space, AP staff will send list of invoices paid to vendor as an enclosure.

Personal Payments (Payments to Individuals)

o Customer departments send completed Invoice Voucher – with a Payee Certification Form
(PC), supporting documentation and approval signatures – to the Tax Department.
o Tax Dept clerk reviews for completeness, checks vendor master data
 If vendor master data missing, contact Vendor Master Data Team to set up.
o Tax Department audits, forwards to Accounts Payable to key into SAP.
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ARIBA Purchase Order Payments
Orders for goods and services are placed in the ARIBA system. As procured items are delivered,
designated individuals in each department or organizational unit are responsible for updating the
ARIBA system to indicate that the order has been received. This activity serves as an authorization
to pay for that good or service. Fiscal Approver training includes instruction on receiving in ARIBA.

All paper invoices for orders placed through the ARIBA system will be mailed to WL Accounts
Payable. All electronic invoices come directly into ARIBA through the ARIBA Network. Accounts
Payable staff will query the ARIBA system to review the status of orders before processing an invoice
for payment.

Process for Invoices with ARIBA Purchase Order Number

The individuals in the role of Accounts Payable – WL are responsible for reviewing and paying
invoices received from Purchase Orders through the ARIBA system.

Upon receipt of a vendor invoice, Accounts Payable staff audit for payment terms, price
discrepancies, and line item detail. Accounts Payable staff will query the system against the
appropriate order number, and review the status of that order. Audit issues include problems with
pricing or with receipt of goods.

 All paper invoices for ARIBA orders will be mailed to Central Accounts Payable on the West Lafayette
campus.

 As invoices for ARIBA orders arrive, Accounts Payable staff will perform a System Search by PO
number to verify the order. The Accounts Payable staff will enter the invoice into the ARIBA system,
which will then automatically post in the SAP system for payment.

 If the Accounts Payable staff determines that further discussion is needed with the department before
paying an invoice, they will notify the Department Business Office, or a similar entity within the area.

 Payment tolerance for orders is 15% (with $100 cap) or $25, whichever is greater. The tolerance does
not include freight charges, Accounts Payable clerks are expected to apply the ‘reasonable test’ to
freight charges if less than or equal to $500. Any freight charges exceeding $500 will require further
investigation by Account Payable clerks beginning with approval by the appropriate buyer in
Purchasing.

 If invoices are entered and blocked for payment because they are out of tolerance, “Invoice Reconciler”
for the department will need to research the issue, update the ARIBA system with an invoice
reconciliation approval.

 If an invoice arrives with no reference to Purchase Order, the Accounts Payable staff will send the
invoice to the ordering Department’s Business Office. The Business Office will need to identify the
order, complete a paper invoice voucher, attach it to the supplier invoice, and return all to Accounts
Payable, unless supplier is foreign, in which case see Process for Electronic Payments to Foreign
Entities.

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Following are potential scenarios the Disbursement staff will encounter when verifying the status of
orders and the actions Disbursement staff will take for each scenario:

Order is Fully Received

1. If the order has been marked as ‘received’ in the ARIBA system AND the cost reflected on the
invoice is within tolerance, Accounts Payable will process payment of the invoice.

2. If the order has been marked as ‘received’ in the ARIBA system but the cost reflected on the
invoice is out of tolerance, the ARIBA system will block the invoice for payment and route for
“Invoice Reconciliation”.

Partially Received Orders

1. If the order has been partially received, the invoice is for a partial shipment AND the invoice is
within tolerance, Accounts Payable will process payment of the invoice.

2. If the order has been partially received, the invoice is for a partial shipment but the invoice is out of
tolerance, the ARIBA system will block the invoice and route for “Invoice Reconciliation”.

3. If the order has been partially received but the invoice reflects the total cost for all items on the
order, the items being invoiced will be entered into the system, creating an out-of-tolerance item
for quantity. The ARIBA system will block the invoice and route for “Invoice Reconciliation”.

Unreceived Orders
1. Invoices will not be paid until the order has been received.

ADDITIONAL SCENARIOS
Fully Received with Additional Items
1. If the order is fully received but the invoice reflects the delivery of additional items, Accounts
Payable will enter the number of items being invoiced into the system, creating an out-of-tolerance
situation for quantity. The ARIBA system will block the invoice and route for “Invoice
Reconciliation”.

Wire Transfers
Process for Electronic Payments to Foreign Entities

ARIBA orders
If Purchasing obtains quote with bank account information, will make information available to
Accounts Payable
o Once order received and out-of-tolerance approval obtained, if applicable, from
Customer department, Accounts Payable staff prepares the Form 52A.
o If supplier bank information missing, Accounts Payable staff contacts Customer
department to obtain information.
o Accounts Payable staff prepares and sends the Form 52A to Treasury Operations.
o Treasury Operations contacts Department for missing/incorrect bank information, if
applicable.
o Treasury Operations processes transaction.

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o Treasury Operations forwards Form 52A to Accounts Payable for data entry into
system.
o Encumbrance closes when payment run is processed.

Direct Pays (No purchase order, no encumbrance)

o Customer departments send completed Direct Debit Journal Voucher & 52A – with
supporting documentation and approval signatures – to the Tax Department.
o Accounts Payable routes to Tax Dept for tax implications and verification of Comptroller
approval
o Tax Dept prepares new vendor set-up form (if necessary), reviews for taxability, and
forwards paperwork to Treasury Operations.
o Treasury Operations processes the transaction
o Treasury Operations forwards Direct Debit Journal Voucher and Form 52A to Accounts
Payable for data entry into SAP.

Tolerance
This relates to mis-matched dollar amounts between an invoice from the vendor and the amount on
the order; and mis-matched quantities between an invoice from the vendor and the quantity on the
order. The tolerance levels are applied on a line by line basis, not on an invoice total basis. An out of
tolerance situation on a single line of an invoice causes the entire invoice to be blocked from payment
in the ARIBA system.

 The Accounts Payable staff will automatically release an invoice if the difference between the
invoice amount and the order amount is < 15% up to an invoice overage of $100.

 If an item is out-of-tolerance > 15% but < $25, the item will be manually unblocked by
Accounts Payable and paid with no action required by department.

 If an item is out-of-tolerance > 15% and the amount is > $25, but < $100, negative approval
guidelines will be applied as follows:

o Business Offices will have 5 business days to respond to ap@purdue.edu if NOT okay
to pay.
o If there is no action by the department the payment will be released in 5 business days.

 If an item is out-of-tolerance > $100, positive approval is required by the department.

o The item will remain on the blocked invoice report until action is taken by the Business
Office.
o The vendor will remain unpaid until action is taken by Business Office.
o Items on the list longer than 10 days will be reported to the Comptroller.

 If an item is out-of-tolerance due to quantity, positive approval is required by the department.

o The item will remain on list until action is taken by the Business Office.
o The vendor will remain unpaid until action is taken by Business Office.
o Items on the list longer than 10 days will be reported to the Comptroller.

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NOTE: Shipping charges are not included when calculating out-of-tolerance, unless the shipping is a line item
on the Purchase Order.

Check Handling

Held Checks
Checks may be requested to be held for pick-up at the Reception Desk at Freehafer Hall. Held
checks are indicated by marking ‘Y’ in the “Held Check?” box on the invoice voucher. A contact
person name and phone number must be clearly marked on the DIV. Checks may be picked up at
the reception desk in Freehafer Hall.

Enclosures
Enclosures will not be sent from Accounts Payable; instead departments are encouraged to utilize the
50-character text field that we have available to us on our remittance advice for payment explanation.
Any text information of 50 characters or less may be placed in the field marked "Text to appear on
remittance advice" contained in the DIV form. If a department finds that 50 characters is insufficient
to explain a payment to a vendor, the check should be marked as a "Held Check" and someone from
the department will need to pick up the check and process its mailing as necessary.

Check Copies/Cancellations/Re-writes
There are several reasons why a check may need to be voided and re-written, or the payment simply
cancelled.
 Paid to wrong vendor
 Lost/Stolen
 Torn/Ripped
 No longer needed
 Duplicate
 Incorrect Amount

For help with this process, see

https://www2.itap.purdue.edu/bs/BPP/Processes/Cancel%20and%20rewrite%20process.pdf

Payment Methods

Purdue University uses the following methods when paying vendors:

 Automated Clearing House (ACH)
 Single Use Credit Card Accounts (SUA)
 Checks
 Wire Transfer
 Purchasing Card

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ACH
ACH is a method of payment that electronically transfers funds to the vendor’s bank account.
 To establish a vendor payment via ACH, the ACH authorization form must be completed by the
vendor and sent to Accounts Payable with the first DIV
 This authorizes all future payments to the same vendor to be paid via ACH

SUA
SUA is an electronic credit card based payment solution that has the controls of a check payment.
Enrollment of the supplier is required for this payment method.

Checks
If a domestic vendor has not completed the authorization form for payments via ACH, the vendor
master record will default to check as a payment method. See
https://www.purdue.edu/business/procurement/acctpay/sua.html for more information on SUA.

Wire Transfer
Wire transfer is a method of payment that electronically transfers funds to the vendor’s bank account
on the same day it is initiated. This is most commonly used for foreign vendors, whether in US
Dollars or foreign currency. See B@P process on “How to Pay a Non PO Related Invoice via Wire
Transfer” https://www2.itap.purdue.edu/bs/BPP/Processes/PayNonPOInvoiceWireTransfer.pdf

Purchasing Card
A Purchasing Card is a Purdue MasterCard used to conduct University business. See “Purchasing
Card Handbook” at http://www.purdue.edu/ecco/pdf/pcardhbk.pdf

Miscellaneous
Cancelled Orders
If the order has been cancelled but an invoice is received for the order, Accounts Payable will review
file to see if a credit has also been received. If a credit has been received, the invoice and the credit
will be entered into the system at the same time. If a credit has not been received, Accounts Payable
contact the department to obtain a credit.

Follow Up Process
The Accounts Payable staff will contact departments as discussed in the out-of-tolerance guidelines
above when discrepancies exist between the invoice and the order information in the ARIBA system.
If the Business Office does not respond within the indicated time frame, Accounts Payable will
forward the list to the Comptroller for review.

Additional Resources
BAP 100 – Online Accounts Payable Training

B@P Payments and Reimbursements -

https://www2.itap.purdue.edu/bs/BPP/public/view_moduleInformation.cfm?view=mod67&name=Paym
ents%20&%20Reimbursements

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Check Copies/Cancel/Rewrite Process - http://www.purdue.edu/acctpay/Forms/cancelRewrite.html

Vendor Invoice Report -

Purchasing Card Handbook -

http://www.purdue.edu/ecco/pdf/pcardhbk.pdf

Wire Transfer - https://www2.itap.purdue.edu/bs/BPP/Processes/PayNonPOInvoiceWireTransfer.pdf

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 University of Houston
ACCOUNTS RECEIVABLE GUIDELINES
Fiscal Year 2016

Email Completed Package To:

Jane Floyd
Email address: jfloyd@uh.edu

Accounts Receivable Reconciliation due to Accounting Services

September 9, 2016

Accounts Receivable Guidelines

Fiscal Year 2016
 Table of Contents

Purpose and Overview ............................................................................................................................. 3

General Guidelines ................................................................................................................................... 4

Definition of a Receivable ........................................................................................................................ 4

When is it Appropriate to Record an Accounts Receivable ..................................................................... 4

Accounting Entries – To Record Receivables ........................................................................................... 5

Accounting Entry – To Record Payments Received .................................................................................. 7

Accounting Entry – To Record Cash Sales ................................................................................................ 7

Accounting Entry – To Record the Return of Merchandise ..................................................................... 8

Accounting Entry – To Record Returned Checks ..................................................................................... 9

Aging, Collecting, and Reconciling Accounts Receivable ....................................................................... 10

Writing Off Accounts Receivable ........................................................................................................... 11

Accounting Entries – To Write Off Accounts & To Record Recovery .................................................... 12

Forgiveness Of Debt ................................................................................................................................ 13

Submitting Accounts Receivable Reconciliation ...................................................................................... 14

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 Purpose and Overview

The goal of this procedure is to provide the policies and procedures related to accounts receivables,
and to improve the accounts receivable management as outlined by the State Auditor s Office. By
understanding the policies and procedures, and by incorporating good business practices, university
employees who monitor and maintain receivables will avoid undue delays and errors.

This packet addresses:

 What is a Receivable
 How to record a Receivable
 How to post Receivables, Payments, and Returns
 The Aging, Collecting, and Reconciling of Receivables
 How to Write Off Accounts and Record Recoveries
 How to formally submit the Write-Off Request

This material is a supplement to the universities formal policies as detailed in the UH Manual of
Administrative Policy and Procedure (MAPP), and in the UH System Administration Memorandum
(SAM).

Personnel working with Receivables should review and be familiar with:

 The UH System Administration Memorandum (SAM) 03.A.24, and

 The UH Manual of Administrative Policy and Procedure (MAPP) 05.04.04.
These can be found on the UH home page www.uh.edu/mapp and www.uh.edu/sam.

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 General Guidelines

The institution is not allowed to deliver merchandise or provide services to individuals, associations or
corporations in any situation where the use of state appropriated funds are involved, unless payment
is received. This prohibition does not apply to federal, state, county or municipal government agencies
or tuition and fees installment options.

Each college or division of the University of Houston is responsible for establishing procedures for
extending credit, billing and collecting receivables, recording and monitoring receivables, determining
allowances for doubtful accounts, and writing off uncollectible accounts. The procedure shall ensure
that any extension of credit is done so in a prudent manner, including the use of standardized credit
applications, commercial credit reports, and specification of the level of authority required for approval
of the credit request. These procedures must be documented in writing and made available to
Accounting Services or Internal Audit upon request.

Definition of a Receivable

Receivables are assets that represent claims against other entities for goods or services provided, but
for which cash has not been received.

Accounts Receivable is considered valid after:

 The buyer of the goods/services has entered into a legally binding agreement
 The receivable can be accurately measured
 The seller has provided goods or services to the buyer
 The payment is due to the seller from the buyer
 The payment has not been received from the buyer
 The revenue from the transaction has been recorded on the seller s books
 There is a reasonable expectation of collection

When is it Appropriate to Record a Receivable?

The recording of a receivable by a UH department may be appropriate if:

 The buyer of the goods or service is not another UH department (Note: Certain exceptions may
apply)
 The receivable is valid (see definition of a receivable)
 Total outstanding receivables represent a significant percentage of a department s sales, (i.e.,
accounts receivable are material to the financial records of the department and thus to the
university)
 The transaction does not represent an extension of credit that is prohibited by law
 The event is deemed to be appropriate by the university s accounting officer

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 Recording a Receivable – Accounting Entries to PeopleSoft

A Receivable is recorded using a journal entry prepared by the department and submitted to
Accounting Services via workflow with the appropriate supporting documentation. These entries debit
the appropriate receivable account, and credit the appropriate revenue account in the department s
cost center in the general ledger.

Accounting Terminology:
Debit: Increases a Receivable account
Credit: Decreases a Receivable account

Example 1 - Low Volume Sales on Account (Single Revenue Account):

Description Cost Center Combination __Debit__ __Credit__

A/R - May Sales (on acct) 00730-2XXX-H0XXX-AXXXX-12100 $ 2,500.00

May Sales & Services 00730-2XXX-H0XXX-AXXXX-43600 $ 2,500.00

The total of the debit(s) must equal the total of the credit(s). Credits may be recorded to more than
one account (See Example 2).

If the sale is subject to state and local tax, the tax liability must be recorded at the time the revenue is
recognized. The sales tax account is credited for the appropriate amount as calculated from the
taxable sale (in this case 8.25 percent).

Example 2 - Low Volume Sales on Account (Multiple Revenue Accounts):

Description Cost Center Combination __Debit__ __Credit__

A/R - May Sales (on acct) 00730-2XXX-H0XXX-AXXXX-12100 $ 2,500.00

May Non-Taxable Sales 00730-2XXX-H0XXX-AXXXX-43600 $ 1,000.00
May Taxable Sales 00730-2XXX-H0XXX-AXXXX-43606 $ 1,385.68
Sales Tax Payable 00730-2XXX-H0XXX-XXXXX-20604 $ 114.32

Both of the above examples show the recording of receivables as a balance for a specific period—the
total sales on account for a month. This method is appropriate for a department with limited sales on
account, with each sale of relatively low value. Entries are prepared by the department on the last
business day of the month and forwarded to Accounting Services before the deadline for recording
that month s business. Entries should be prepared more frequently by departments with a significant
amount of their business on account.

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An alternative, and the preferred method for departments with a high value sales volume, is to record
each sale as an individual receivable.

Example 3 - High Value Sales on Account:

Description Cost Center Combination __Debit__ __Credit__

A/R - L. Smith #3012 00730-2XXX-H0XXX-AXXXX-12100 $ 811.88

A/R - C. Nash #3015 00730-2XXX-H0XXX-AXXXX-12100 $ 2,067.58
May Taxable Sales (3012, 3015) 00730-2XXX-H0XXX-AXXXX-43606 $ 2,660.00
Sales Tax Payable 00730-2XXX-H0XXX-AXXXX-20604 $ 219.46

All journal entries must be supported by copies of the detailed sales records and invoices for the sales
on account.

The department business manager should review the business records to ensure that the total of the
detailed sales records equal the cash sales (currency, check, credit card) plus the sales on account.

In this example separate lines exist (debits) for the receivables due from L. Smith and from C. Nash.
This method produces separate detail lines in the A/R account for the departmental cost center in the
PS general ledger. When a transaction report prints (from PS) each line displays. This method makes
the reconciliation of the Receivable much easier.

Because revenue recognition does not result from the collection of cash on account, the entries to
record sales on account should never be confused with, or included with, the entries to record cash
received on account (SEE Example 4).

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 Recording Payments Received – Accounting Entry to PeopleSoft

Example 4 – Receipt of Payment on Account (L. Smith):

Description Cost Center Combination __Debit__ __Credit__

Cash Deposit 00730-BANK $ 811.88

A/R - L. Smith #3012 00730-2XXX-H0XXX-AXXXX-12100 $ 811.88

In this example, L. Smith sent a check in the amount of $811.88 for payment of the receivable recorded
above (SEE Example 3). A credit to the receivable for the entire amount of the payment reduces the
account balance to zero. Note that credit entries to Sales Tax Payable (20604) and to the Revenue
(43606) were previously recorded (SEE Example 3). As a result, this entry does not duplicate the
Payable or the Revenue.

Cash received as payment on an account:

 Is included in the department s daily cash receipts
 Must credit the receivable
 Must NOT be reported as a new sales revenue

Recording Cash Sales – Accounting Entry to PeopleSoft

Example 5 – To Record Cash Sales:

NOTE  When cash is received at the time of sale, no Receivable Account will exist. Instead, the debit
is to the BANK account.

Description Cost Center Combination __Debit__ __Credit__

Cash Deposit 00730-BANK $ 501.55

Nontaxable sales 00730-2XXX-H0XXX-AXXXX-43600 $ 350.00
Taxable sales 00730-2XXX-H0XXX-AXXXX-43606 $ 140.00
Sales Tax Payable 00730-2XXX-H0XXX-AXXXX-20604 $ 11.55

The above entry records both Taxable and Non Taxable sales. The amount of the Sales Tax entry is
derived by multiplying the amount of the Taxable Sales by the current tax rate (@ 8.25% in this case).

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 Recording the Return of Merchandise – Accounting Entry to PeopleSoft

In the event that merchandise sold on account is returned, the amount of the receivable is reduced
(credit) by the amount of the return. The revenue and sales tax are debited for the appropriate
amounts. The entries for the Return of a Sale are show below, using the C. Nash sale (Invoice #3015)
as an example.

Example 6 - Return of Merchandise Purchased on Account:

Description Cost Center Combination __Debit__ __Credit__

Taxable Sales (Nash Return) 00730-2XXX-H0XXX-AXXXX-43606 $ 1,910.00

Sales Tax Payable 00730-2XXX-H0XXX-AXXXX-20604 $ 157.58
A/R - C. Nash #3015 00730-2XXX-H0XXX-AXXXX-12100 $ 2,067.58

As with all accounts receivable entries:

 The debits and credits must balance.
 Sales/Return Documentation must support the transactions.

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 Recording Returned Checks – Accounting Entry to PeopleSoft

Payments received by check that are returned to the University as unpaid (insufficient funds,
cancellations, etc.) are recorded by Student Financial Services (SFS).

The entry recorded is a debit to account 12101, A/R – Returned Checks, and the designated cost center
provided by the College/Division to SFS and a credit to the BANK account.

Example 7 - Returned Checks:

Description Cost Center Combination __Debit __Credit__

Returned Check 00730-2XXX-H0XXX-AXXXX-12101 $ 100.00

Returned Check 00730-BANK $ 100.00

If payment is received for the returned check, the following entry should be made:

Example 8 -- Payment for Returned Checks:

Description Cost Center Combination __Debit __Credit__

Payment Returned Check 00730-BANK $ 100.00

Returned Check 00730-2XXX-H0XXX-AXXXX-12101 $100.00

Detailed information for returned checks recorded to your department s cost center can be obtained
by running the 1074 Report Section 3, Transaction Detail for Asset/Liability /Fund Equity, for your
College/Division.

Review the transaction detail for account 12101 to obtain a list of journals recording transactions to
account 12101.

After obtaining the list of journals, review the journals in PeopleSoft. The backup attached to the
journals will have the information regarding the returned checks. (Returned check journals will record
transactions for more than one College/Division you will have to identify the information specific to
your College/Division.)

The information obtained from the journal backup should be used to complete the Returned Checks
Worksheet.

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 Aging, Collecting and Reconciling Accounts Receivable
All departments recording accounts receivable must maintain adequate records of their accounts.
Each transaction is individually reviewed; this is important for aging, collection and write-off, if
necessary.

Departments will reconcile their outstanding receivables to the institution s financial system monthly.
Monthly reconciliations will be maintained and must be made available to Accounting Services and/or
Internal Auditing upon request.

Departments must also maintain an aging schedule for all accounts receivable. The total of the aging
schedule should be equal to the total accounts receivable recorded. Standard aging brackets used are:

0-30 days,
31-60 days,
61-90 days,
91-120 days,
121-180 days,
181-360 days,
361-720 days, and
Over 720 days.

The department recording the receivable has the sole responsibility for collecting the account. The
department must have a documented collection procedure in place and on file in Accounting Services.
A recommended schedule of activities for this procedure includes:

0-30 days Mail original invoice

31-60 days Mail second copy of invoice with stamped notice PAST DUE
61-90 days Mail standard collection letter demanding payment
91-120 days Place telephone call to debtor
121-180 days Mail certified letter with return receipt each month
Place telephone call each month
181+ days Mail letter each month with copy to UH General Counsel

All collection activity must be logged, and copies of all correspondence to the debtor retained.

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 Writing-Off Accounts Receivable
Accounts deemed as not collectible must be written off. Accounts receivable are eligible for write-off
when they remain outstanding for 720 days (2 years). Outstanding accounts, originating during or
before fiscal year 2014, are eligible for write-off in this fiscal year.

Before a receivable is written-off, the department must demonstrate that adequate steps were taken
to collect the receivable. Departments writing off any account(s) must prepare a package and send it
to Accounting Services.

The package will include:

1. A cover memo signed by the business manager, stating the total amount of the requested
write-off.
2. Cost Center, account and amount for Accounting Services to prepare a Journal Entry to book
the write-off when BOR approval is received.
3. A current reconciliation of the department s outstanding Accounts Receivable.
4. A current Aging Schedule supporting the accounts to be written off.
5. A list of the individual accounts for write off consideration.
6. Each individual account to be written-off must be supported by:
 A copy of the original invoice,
 A copy of the Collection Activity Log, and
 All correspondence relating to the collection activities for that account.

If account to be written off are checks, additional information required is:

 Name of Check Writer
 Check Number
 Check Date
 Check Amount
 Check Purpose
 PeopleSoft ID, if check was written by a student or employee

The Board of Regents of the University of Houston System approves all amounts written off. A list of
the accounts slated to be written off is prepared by Accounting Services and submitted to the Board
once each fiscal year.

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 Accounting Entries to PeopleSoft Financials to Write Off Accounts to Record the
Recovery of an Account Previously Written Off

A/R Write Off Entry: (Note: Write off journals are prepared by Accounting Services)

Example 9 - A/R Write Off Entry:

The following entry will reduce the Accounts Receivable and the Fund Equity. The amount is equal to
the total of all accounts written off.

Description Cost Center Combination __Debit__ __Credit__

Fund Equity Deduction 00730-2XXX-H0XXX-AXXXX-36100 $ XXX

A/R 00730-2XXX-H0XXX-AXXXX-12100 $ XXX

Fund equity is used because the sales revenue associated with the write-off was recorded in a prior
fiscal year.

Recovery Entry – For Payment Received on Account Previously Written Off: (Note: Recovery journals
should be discussed with Accounting Services prior to preparation)

Example 10 - A/R Recovery:

If a vendor submits payment on an account previously written off the books, then an entry must be
written to record that transaction.

The entry should be written and submitted to Accounting Services during the month the recovery is
made.

Description Cost Center Combination __Debit__ __Credit__

Cash Deposit 00730-BANK $ XXX

Fund Equity Increase 00730-2XXX-H0XXX-AXXXX-32100 $ XXX

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 Forgiveness of Debt
The write-off of an account is a bookkeeping entry only and does not relieve the debtor from financial
responsibility to the university. Although the account has been removed from the books, the
university may still have a claim against the debtor and may still seek legal remedy. Therefore, it is the
responsibility of each department to maintain adequate records regarding legal debts owed to the
university. Departments who wish to forgive a debtor's obligation to the university shall seek advice
from UH Counsel and the Director of Tax Compliance in the office of the Assistant Vice President for
Finance regarding any special tax consequences relating to the forgiveness of debt.

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 Submitting the Accounts Receivable Reconciliation

Accounting Services prefer the Accounts Receivable Reconciliation be submitted electronically.

The department should retain copies of all materials and worksheets used to calculate the values.

Email completed electronic (preference) reconciliation to:

Jane Floyd
Email address: jfloyd@uh.edu

If submitting Accounts Reconciliation by paper, send to:

Accounting Services
UH Energy Research Park
Building 1, Room 207

Due: September 9, 2016

Incomplete packages will be returned to the Business Administrator.

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