Accounts Receivable Procedure

Purpose statement

This procedure outlines the process and responsibilities for providing centralized accounts receivable services to third parties for materials and services provided by the Town of Oakville (town).

Scope

This procedure applies to all departments that provide materials and/or services to external parties which are not paid for prior to, or at the time, the materials and/or services are being delivered.  In addition, it applies to all agreements which require the Town to provide an invoice in advance of providing materials and/or services (ex. Sponsorship agreements). This utilization of centralized accounts receivable procedures does not cover the following services:  Harbours, Cemeteries, Recreational Programs Registration, Membership Activities, Facility Bookings, and Oakville Centre (see non-centralized section).

Procedure

Invoice creation - Requests from departments

  1. Departmental staff complete an Invoice Requisition form, which details the customer’s name and address, description of materials and/or services provided, costing information, appropriate General Ledger (GL) revenue account number, and mailing instructions.
  2. Completed Invoice Requisition form and backup information is forwarded to Accounting Operations.
  3. Accounting staff review the form for completeness, value-added tax implications and appropriate GL account number.  All revenue must utilize an object code in the 8000 series and billings may not be netted against expenses.
  4. Standard practice for additional charges relating to payroll overhead and administration charges:
    1. repair and maintenance services provided by Roads & Works or Parks include:
      1. overhead payroll burden of 52% (on direct labour costs)
      2. 15% administration charge on all components of the invoice including labour, materials and vehicle usage charges.
    2. Traffic accident related invoicing include the following:
      1. overhead payroll burden of 53%
      2. 20% material handling charge on materials used
      3. 15% deduction on materials for depreciation
      4. 15% administration charge on all costs
    3. Halton Region and Oakville Hydro service billings are unique and staff must follow the applicable service agreement.
  5. An official town invoice is generated in the Corporate Information System (CIS) on a timely basis and either mailed to the customer or returned to the requesting department, as noted on the invoice requisition.
  6. The department’s revenue account is updated to reflect the revenue earned in the period that the service occurred or as indicated on the invoice requisition. Collection of the invoice is the responsibility of Accounting Operations staff; however, assistance may be required from the requesting department.
  7. Statements on overdue accounts are sent to the applicable department to keep them apprised of collection status.
  8. Payment terms are 30 days from date of invoice unless otherwise specified by the requesting department. Overdue invoices are subject to interest charges as per the Rates and Fees.

Monthly, bi-monthly or quarterly invoicing

  1. Standard monthly or bi-monthly invoicing (i.e. Regional Roads Maintenance, Traffic) is created automatically by Accounting Operations using reports from CIS based on location or work order subledgers.
  2. Proposed billing must be approved by the responsible department before the official invoice is sent out.
  3. The responsible department must provide all necessary back up documentation to substantiate invoicing.

Invoice payment process

  1. Payment can be made either by cash, cheque, credit card or debit card.  Cash or cheque is the preferred method of payment. Electronic funds will also be accepted upon approval by the Manager, Accounting Operations.
  2. Accounts Receivable system is updated to reflect the payment.
  3. Invoices not paid within the 30 days follow the collection process.

Collection process for overdue accounts

  1. Overdue notices are sent out when an account is past due for 30, 60 and 90 days.
  2. Financial Operations staff also attempt to contact the customer by phone to ensure that correct billing information has been provided.
  3. Departments are provided with quarterly aging statements of outstanding accounts receivable.
  4. Once an account is overdue more than 90 days, final notice is sent to the customer advising that their account will be put into collection if not paid within 10 days.  Failing a response to the final notice a follow up telephone call will be made.
  5. Whenever possible and in accordance with Municipal Act, Section 398(2), outstanding accounts will be added to the tax roll (i.e. billings for false fire alarms, property standards violations, harbours, etc.).
  6. Once all attempts by staff to get an invoice paid have been exhausted, the Manager, Accounting Operations will determine if the account should be referred to the registered collection agency engaged by the Town of Oakville. The Municipal Act, Section 304, authorizes the municipality to use a registered collection agency for the recovery of a debt. An additional charge of 25% will be added to the invoice amount to cover the costs of the collection agency.

Allowance accounts

  1. Annually an amount is budgeted and transferred to the allowance account.
  2. At year end an analysis is done on all outstanding accounts receivable to determine if the balance in the allowance account is appropriate given the value of outstanding accounts receivable which are in risk of collection.
  3. Accounts deemed to be uncollectible by either staff or the collection agency due to true bad debt are written off against the corporate allowance.  Uncollectable receivables due to department’s delay or errors in billing will be written off against the department’s revenue account. The receivable will be reviewed by the Manager, Accounting Operations and a decision made based on the circumstances.

Non-centralized accounts receivable

The following departments who, through their departmental systems, maintain separate receivables tracking do not have to utilize the centralized accounts receivable for their operational needs:

  1. Oakville Centre for the Performing Arts
  2. Harbours
  3. Cemeteries
  4. Recreation and Culture (CLASS) memberships, facility booking and program registration
  5. Property taxes

Departments must ensure the management, collection and record retention of non-centralized receivables is maintained and available for audit. Reconciliation of the balance sheets and proper back up aging must be provided to the Manager, Accounting Operations on a quarterly basis for sign off.

If billings are for services detailed within the annual rates and fees book, fees must match what has been approved. Departments must ensure that HST is charged on applicable services and that the funds are posted to an account within the town’s balance sheet for remittance to the Canada Revenue Agency.

During the year end review, the amounts in the accounts receivable must only be for services performed or delivered in previous/current periods and must not include future services. The exception to this would be amounts owing for future events or sponsorships.  In these situations Accounting Operations will determine the appropriate accounting treatment.

Annual review of write-offs must be completed and signed off by the Manager, Accounting Operations.

Definitions

Aging: is an accounts receivable standard term which tracks unpaid invoices by predetermined milestone dates.  These dates are usually 30, 60 and 90 days from date of generation.

Non-centralized accounts receivable: accounts receivable invoicing must be done in CIS by Financial Operations with the exception of those departments who manage their own accounts receivable system.

Responsibilities

The following are responsible for:

Departmental staff:

Preparing timely invoice requisitions to be sent to Accounting Operations and assist, where possible, in collection process.

Financial Operations:

Accounting Clerk: reviewing invoice requisitions forms, checking account numbers and HST, preparing invoices to be sent to customers, and ensuring revenue account codes are utilized. Filing all invoices and payments received centrally for audit.

Accounting Analyst: following up on overdue accounts, working closely with the collection agency, when necessary, and documenting all collection activity for audit and review.

Manager, Accounting Operations: approving the referral of accounts to collection agency, reviewing all overdue accounts along with the allowance for doubtful accounts, ensuring all liabilities to Canada Revenue Agency are paid in accordance with legislation.

Deputy Treasurer, Director: approving uncollectible accounts to be written off.

Non-centralized accounts receivable departments:

Performing periodic reconciliation of the aging to the GL, ensuring that any quarterly aging of receivables are signed off by the Manager, Accounting Operations or designate, and that year end procedures are adhered to.

Procedure details

Procedure Number: F-FOC-001-004
Parent Policy: F-FOC-001
Section: Finance
Sub-Section: Financial Operations
Author: Financial Operations, Accounting
Authority: CAO
Effective Date: 2011 Nov 21
Review by Date: 2021
Last Modified: 2016 Dec 12

References

Appendix A - Invoice Requisition Form
Stale-dated Credits in Class Accounts Receivable
Recreation & Culture – Outstanding Account Collection Procedure
Records Retention by-law
CRA regulations
Year end procedures
Recreation & Culture – Small balance write off
Property Tax – Small balance write off
A-GEN-001-002 Corporate Sponsorship Procedure