Revised: November 23, 2010
Accounts receivable are the result of various types of financial transactions including but not limited to: student tuition, fees, room, board, miscellaneous student accounts, short-term loans from State funds, as well as from sales of products and services to the general public and private sector. It is necessary that procedures be in place to maximize collection of delinquent accounts receivable and minimize the administrative cost of those efforts. Note: Collection on Federal Perkins (NDSL) Nursing Student Loans and Health Profession loans are not covered by this paper.
Regents Policy Document R05.02.04 – Management/Cash Flow/Fiscal Reporting
- Accounts receivable – Any obligation or alleged obligation arising from a consumer transaction. Unusable credit memos may also be considered another form of accounts receivable.
A nonstudent account is “delinquent” when it is past the stated due date or, if no due date is stated, more than 45 days beyond the billing/invoice date.
A student account is “in default” when the terms of the written agreement that cover the obligation are not met, or:
- If pursuant to an open-end plan, it has been past due on two occasions in any 12-month period.
- If pursuant to a closed-end plan:
- Where the interval between payments is two months or less, when either two or more outstanding payments have been past due for more than 10 days, or when the first or last payment has not been made.
- Where the interval between payments is more than two months, when one outstanding payment has been due for more than 60 days.
- Where only one payment is scheduled, when it has been past due for more than 40 days.
- Student – For the purpose of this paper, a student is defined as one who enrolls in and is assessed a fee or tuition for any credit or noncredit course offered by a UW institution.
It is the responsibility of each institution to establish the terms and/or conditions for payment at the time an account is created and to follow up routinely and diligently on all accounts receivable. Credit should not be extended to students, individuals or entities who are in default on other obligations or for whom previous obligations have been written off as uncollectible. If a student account is in default, transcripts may be withheld. However, during the pendency of a bankruptcy action, transcripts shall not be withheld.
V. Collection Procedures
The size of the account receivable may influence the effort put into collection attempts. The expenditure of time, effort and money to collect large accounts receivable is appropriate; however, the same efforts expended on very small accounts receivable may not be economical. The collection activity undertaken should be documented in writing. The following steps must be conducted in collecting accounts receivable which are delinquent or in default.
- A follow-up billing must be sent on accounts receivable which are delinquent or in default.
- A collection letter(s) must be sent if payment is not received in response to the follow-up billing. Telephone contact is recommended if no explanation or payment is received in response to billings or collection letter(s).
- Accounts receivable which the institution is unsuccessful in collecting through the above procedures may be referred to the Wisconsin Department of Revenue’s TRIP program referenced in section E. below, a collection agency or small claims court. Note: Collection agencies will, upon request, report customer accounts to credit reporting agencies. Any amount due, regardless of amount can be reported. A balance due on a customers credit file must usually be paid before the person can obtain a loan.
- All credit arrangements and promissory notes must contain a provision (notice) that the debtor is responsible for all collection costs on amounts not paid when due, including, but not limited to, attorney fees and collection agency fees.
- The Wisconsin Department of Revenue (DOR), through its Tax Refund Intercept Program (TRIP), may aid the collection of these debts by withholding State tax refunds to individual taxpayers with debts to State agencies. The DOR will honor tax intercept requests where a State agency has certified unpaid debt that has been reduced to a judgment OR where a taxpayer has been afforded reasonable notice and the opportunity to be heard in regard to the debt. The U.S. Internal Revenue also provides a similar service for withholding federal tax refunds.
VI. Write-off Procedures
A clear distinction needs to be made between canceling an invoice and writing off an accounts receivable. An invoice may be canceled because the institution, for a variety of reasons, is not entitled to collect the money. An accounts receivable must not be canceled to avoid write-off procedures. Accounts receivable that are uncollectible may be written off in accordance with the following:
- In all cases, write-offs must be approved by someone not directly associated with either the billing or collection efforts.
- Accounts receivable up to $200, may be written off by the institution if all collection efforts have been completed up to the point where the account would have been referred to a collection agency.
- Accounts receivable between $200 and $1,000 may be written off by the institution if returned as uncollectible by a collection agency.
- Accounts receivable between $200 and $1,000 which have not been referred to a collection agency and all accounts receivable over $1,000 must be referred to UW System Financial Administration for write-off approval. Requests for write-off should include name, amount, school term (if tuition/fees) and statement why that accounts receivable has been determined to be uncollectible.
The UW System must submit a consolidated report of accounts receivable and write-offs to the State Controllers Office annually.