Credit Management Procedures

These procedures apply to all University members that provide services to external customers in return for payment to the University and/or perform the following financial management functions at UOA:

• Credit control activities
• Creation and maintenance of customers in PeopleSoft
• Raise invoices and credit notes for faculties, LSRIs and divisions
• Manage debt collections and recovery
• Manage provision and debt write offs

The University of Auckland (UOA) supplies services to external customers in return for payment. The following procedures outline the process and requirements for credit management activities prior to invoicing, and the collection of overdue debt for services that are supplied by UOA to external customers on credit terms.

Process and Key Controls

1. University members intending to provide a service to an external customer in return for payment on credit terms that is greater than $1,000 must contact Accounts Receivable (AR) in the Finance Shared Transaction Centre by completing New Customer Setup or Reactivation Form (FS-11) and attaching the completed Customer Application Form, signed by external customer, prior to:

• commencing the provision of new services to the customer, or
• to re-activate an existing customer.

2. Faculty/LSRIs/Department units that regularly request invoices to be raised for less than $1,000 should investigate the option of establishing a web-based sale interface that accepts online payments to manage high volume, low value transactions as this is the most cost-effective way to process these transactions.

3. All new customer accounts require a new Customer Application form to be completed and signed by the customer. Accounts Receivable will assess the customer’s credit risk to UOA and notify the UOA Requestor on the outcome of the credit assessment.

• Donor receipts are exempt from these credit management procedures, see Philanthropic Gift Acceptance Policy. University members must attach the Donor Agreement to support creation of customer account in PeopleSoft AR.

4. Credit approval is required from Accounts Receivable prior to commencing the provision of services to the customer and in cases where a customer account has been made inactive in PeopleSoft Financials. Where the University has previously allowed credit terms then the account will exist – see list of Active Customers.

5. Accounts Receivable will create new customer accounts in PeopleSoft Financials following credit approval and notify the relevant University member.

6. The requestor is responsible for submitting an Invoice Request Form (FS 21) to Accounts Receivable to invoice external customers for the provision of services. All invoicing must be processed through PeopleSoft Financials.

7. To manage overdue debts payable to the University, Accounts Receivable will monitor the credit risk of external customers and perform debt collection activities as required.

8. Unrecoverable debts are declared bad and will be written off against the relevant Organisational Unit. A bad debt write off may only be approved by UOA officers that have the relevant financial sub-delegation as per Financial Delegations Policy.

Key Requirements

Credit Risk Assessment and Approval

9. University members intending to provide an external customer with trade or research or consulting services on credit terms must contact Accounts Receivable by completing the New Customer Setup or Reactivation Form (FS-11)  before committing UOA to the transaction or contract. Services to external customers on credit terms must not be provided without prior credit approval and validation of the customer from Accounts Receivable.

10. Accounts Receivable will conduct due diligence on the customer and assess the credit risk to the University by undertaking the following activities once the completed Credit Application Form is received:

• verifying the identity of the customer and assessing their suitability to trade with UOA based on the New Zealand Government’s ‘know your customer’ website; and
• performing a credit risk assessment and determining the customer’s ability to pay. Reports from an independent credit reporting bureau may be used to assess credit risk of new customers.

11. Accounts Receivable will undertake the credit risk assessment and customer validation process in a timely fashion to minimise disruption of the provision of services to UOA customers.

12. Where the credit assessment of an external customer indicates an unacceptable level of financial, reputational, or other risk to UOA, Accounts Receivable may decline to approve the customer for credit and will notify the University member of the decision.

13. Before making a recommendation not to approve a credit exposure or to discontinue supply of goods or services to an existing customer account; Accounts Receivable will consult the relevant University member and Credit and Collections Manager.

• For a credit approved and validated customer, Accounts Receivable will create a new customer account in PeopleSoft Financials and notify the relevant requestor/team that billing may commence.
• The University’s Standard Terms of Trade are that payment is due on 20th of the following month after invoice date.

Credit Risk Monitoring

14. Accounts Receivable will also monitor existing customers and may recommend declining continuing trade if there is an unacceptable level of financial, reputational, or other risk to UOA. For example, if a customer has not paid an overdue debt, Accounts Receivable may recommend that continued trading with the customer be ceased. 

Invoicing

Invoices

15. The requestor is responsible for requesting the invoice process to begin by submitting an Invoice Request Form (FS 21) to Accounts Receivable.

16. Accounts Receivable will check the request for completeness and accuracy before finalising set-up in PeopleSoft Financials.

17. Invoices are distributed centrally by Accounts Receivable and occurs once invoices have been raised and marked ready for dispatch via email.

18. The invoicing of Research and Consulting Projects is carried out by the Research Operations Centre, who will check for completeness and accuracy before finalising in PeopleSoft Finance Project Express billing module. Research Operations Centre will distribute invoices via e-mail to external customers.

19. Invoice attachments can be sent to customers with the invoice. These attachments are supporting documentation and must be uploaded into PeopleSoft financials prior to the invoice being dispatched. Attachments must be less than 10MB in size and be in PDF format only. 

Credit notes

20. Credit notes may only be given in limited circumstances. A credit note must not be issued to write off a debt. The following are the approved reasons for when a credit note can be issued:

• Cancellation of a supply already provided;
• Variation or alteration of the nature of the supply;
• Alteration of a price (e.g. because of a discount); or
•  Return of part or all of the supply.

21. Credit note requests must have all supporting documents attached so that the reason for a credit note is held in the PeopleSoft financial system for audit purposes.

• Credit notes must be authorised by the designated approver in accordance with the Financial Delegations Policy.
• Credit notes must be issued promptly because GST is paid by the University to the IRD as soon as a GST invoice is issued.
• A Credit note can be requested using FS-22.
• The creation of credit notes for Research and Consulting Projects is carried out by the Research Operations Centre.

Management of Overdue Debt

22. Accounts Receivable will perform the following activities to manage overdue trade debts payable to UOA:

• Actively monitor and pursue payment with the emphasis on personal contact with customers, and appropriate to the situation, when an account is overdue.
• Contact customers/debtors with reminder notices for due debts and overdue debts as follows:
  •  Invoice is 1-30 days overdue – First Reminder email
  • Invoice is 31-60 days overdue – Second Reminder email
  • Invoice is 61-90 days overdue – Final Reminder notice
  • Invoice is 91 days or more overdue – Final Demand by letter
• Consult with Research Operations Centre, Finance Business Partners and UOA Billing requestor/service provider providing services to assist with the collection of overdue debt from customers.
• Issue final demand notices for debts confirmed to be correct, dispute free and owing to the University.
• Refer overdue debtors to external third-party debt collection agencies in consultation with University Organisational Units. 

Debt write-off

23. Unrecoverable debts are declared bad and will be written off against the provision for bad and doubtful debts and charged to the Organisational Unit. Reasons for writing off unrecoverable debt may include:

• Insolvency, including bankruptcy, administration or liquidation (where UOA is an unsecured creditor).
• Skip trace, or the debtor is no longer contactable and UOA is unable to locate the debtor.
• The debt is uneconomical to continue pursuing recovery.
• Reputational risk to UOA is too high, particularly if there may be an unresolved dispute regarding the debt.
• Where there is a perceived risk that legal action may adversely affect the reputation of UOA, or upon legal advice, is considered not in the interests of the University.

24. Accounts Receivable Financial Operations maintains a register of debtors whose debt has been written off. The register records the details of the debt, the authority for write-off, and any subsequent action to reinstate the debt.

25. A debt that has been written off must be paid in full before additional credit will be given. To prevent future usage, debtor accounts are inactivated, and comments recorded in Peoplesoft Financials.

26. Where a debt is recovered after being written off, it is treated as a bad debt recovered.

Roles, Responsibilities and Accountabilities

Chief Financial Officer

27. The Chief Financial Officer is responsible for:

• advising on any exceptions to credit risk assessments and approval; and
• approving high value credit exposure and bad debt write off in accordance with the schedule of Financial Delegations Policy.

Accounts Receivable

28. Accounts Receivable, within the Finance Shared Transaction Centre, manages UOA’s credit risk assessment and debt collection activities, and is responsible for:

• performing verification checks of all new customers to UOA in accordance with ‘know your customer’ (KYC) guidelines;
• monitoring and performing credit risk assessments of new and existing customers to mitigate bad debt losses, and escalating credit related issues to the Credit and Collections Manager;
• creating and maintaining all customer accounts in PeopleSoft Financials;
• monitoring, reviewing and reporting on the performance of overdue debt;
• debt collection activities and collaborating with University Organisational Units and customers to resolve disputed debts, and escalating overdue debt to the Group Financial Controller where the risk to UOA is assessed as medium to high;
• referring overdue debt to a third-party agency for collection when all internal recovery attempts have failed, and managing the vendor relationship for third party collections; and
• providing support and advice to internal and external stakeholders in relation to UOA credit, billing and debt collection. 

Maintenance of Customer Accounts

29. The Accounts Receivable team is responsible for the maintenance of customer accounts;

• Where no transactions have been entered against a customer account in the previous two-year period, the account is subject to review and may be changed to Inactive.
• To reactivate the account, a Client Application form must be completed and submitted on New Customer Setup or Reactivation Form (FS-11)  to ensure the correct details are recorded.
• Accounts Receivable Invoicing check PeopleSoft for Inactive Customer account and add Inactive customer number to Service Request when assigning to Accounts Receivable Credit Control.
• Any changes to a customer’s name must be supported by official documentation containing the customer’s letterhead and retained for official confirmation as an attachment in PeopleSoft Financials (PSF).
• Changes to customer name are to be notified to the Faculty, LSRI or Department that hold a relationship with that customer.
• Further credit should not be extended to a customer whose account is already overdue. Debt management efforts are recorded in PeopleSoft Financials Accounts Receivable Customer Conversation module.

University members

30. University members providing external customers with trade, research or consulting services in return for payment to UOA are responsible for:

• engaging with University service providers and customers to collect mandatory information for invoicing;
• liaising with the Organisational Unit’s Director of Faculty Finance (DFF) or delegate; for approval to arrange and request invoicing in PeopleSoft Financials and ensure the accuracy and payment of debt;
• seeking customer validation and credit approval from Accounts Receivable prior to providing a service to a new customer;
• seeking confirmation that further invoicing is acceptable where a customer account is overdue;
• seeking University Treasury authorisation for requests to invoice in foreign currency, other than AUD, USD, GBP and EURO, for contracts or agreements between the University business units and their customers, before an Invoice Request is submitted , See Foreign Exchange (Hedging) for Research and Consulting Contracts Policy; and 
• assisting Accounts Receivable with the collection of overdue debt from customers. 

Monitoring, Review and Assurance

31. Credit monitoring will be performed by Accounts Receivable for all customer accounts in Peoplesoft with overdue balances in order to mitigate bad debt loss to the University.

32. Accounts Receivable will assess compliance with this procedure via a range of mechanisms including:

• monitoring the effectiveness of UOA’s credit risk management protocols;
•  reviewing relevant local standard operating procedures to ensure requirements and processes are accurate and effective; and
• monitoring the age of debt transactions reconciliation of customer accounts.

33. Accounts Receivable will review this procedure periodically to ensure that it is current and relevant, and that it provides for efficient and effective credit management, invoicing, and debt collection processes at the University. 

Recording and Reporting

34. Group Financial Control is responsible for reconciling the outstanding debtors listing from the Accounts Receivable module to the general ledger. The reconciliation is performed as part of the month end process.

35. Accounts Receivable will provide data and trend reports to monitor overdue debt collection. Reports will be provided as follows, at a minimum:

• monthly to the Shared Transaction Centre Manager, Group Financial Controller and Credit and Collections Manager; and
• quarterly to the Director of Faculty Finance, Senior Finance Business Partners and Finance Operations.

The following definitions apply to this document:

Credit is the ability for a customer to obtain goods or services before payment.
Customer is any external entity, organisation, company, partnership, or individual who obtains goods or services from the University.
Debt means a sum of money that is owed or due.
Debtor is an external entity who owes money to the University.
Faculty/LSRI/Department means Faculty, Service Division, Large Scale Research Institute (LSRI), or any department requesting an invoice to be raised.
Provision (services) is providing or supplying goods or services for use.
Provision (debt) means an amount set aside in an organisation’s account for a known liability.
University means Waipapa Taumata Rau | University of Auckland and includes all subsidiaries.
University members includes University employees, students, Council committee members, contractors, sub-contractors and invitees.

Include the following:

• Credit Management Policy
• Financial Delegations Policy
• Foreign Exchange (Hedging) for Research and Consulting Contracts Policy
• Contracting, Billing and Accounting of Advisory Panels, Boards and Miscellaneous Academic Service Transactions, Testing and Non-Credit Course and Workshop Transactions Guidelines
• Billing & Accounts Receivable User Manual
• Customer Account Application Form (FS-11b)
• Customer Maintenance Form (FS-11a)
• Goods and Service Tax (GST)

Owner: Chief Financial Officer
Content manager: Group Financial Controller
Approved by: Vice-Chancellor
Date approved: 3 April 2014
Date last reviewed or amended: 16 October 2024
Next review date: 31 December 2029