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.

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, with the exception of accounts receivable charges that are outside the scope of these services systems: 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 distribution instructions.
2. Completed Invoice Requisition form and backup information is forwarded to Revenue Services and Tax Division (hereinafter called Revenue Services).
3. Revenue Services 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, Traffic Operations 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 52%
      2. 20% material handling charge on materials used
      3. 15% deduction on materials for depreciation
      4. 15% administration charge on all costs
   3. Service agreements with external partners are unique and staff must follow the applicable service agreement as it relates to invoicing.
5. An official town invoice is generated in the town’s corporate software on a timely basis and either issued (via mail or email) 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 Revenue Services 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 town’s 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 Revenue Services using reports from the town’s corporate software 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 cheque, credit card, debit card, e-transfer (via email) or electronic funds transfer (EFT). 
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. Revenue Services 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.
5. Whenever possible, and in accordance with the Municipal Act, 2001 Section 398(2), outstanding accounts will be added to the tax roll (i.e. billings for false fire alarms, property standards violations, harbours and so forth).
6. Once all attempts by staff to get an invoice paid have been exhausted, Revenue Services staff will determine if the account should be referred to the registered collection agency engaged by the Town of Oakville. The Municipal Act, 2001 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. At year-end, an analysis is completed for 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. Based on the analysis, the allowance account will be adjusted accordingly.
2. Accounts deemed to be uncollectible by either Revenue Services staff or the collection agency due to true bad debt are written off against the corporate allowance. Uncollectable receivables due to a department’s delay or errors in billing will be written off against the department’s revenue account. The receivable will be reviewed by Accounting staff and a decision made based on the circumstances.

Non-centralized accounts receivable

The following services and programs through their departmental systems, maintain separate receivables tracking and 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 (memberships, facility booking (excluding reciprocal agreements) and program registration)
5. Property Tax

These Divisions 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 of Accounting on an annual basis for sign off.

If billings are for services detailed within the annual rates and fees book, fees must match what has been approved. These Divisions 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 staff will determine the appropriate accounting treatment. 

Annual review of write-offs must be completed and signed by the appropriate department management to which the write-off relates to, as recommended by Revenue Services.

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 the town’s corporate software by Finance 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 Revenue Services and assist where possible in the collection process.

Finance

Revenue Services will review invoice requisitions forms, check account numbers and HST, prepare invoices to be sent to customers, and ensure revenue account codes are utilized. Revenue Services will file all invoices and payments received centrally for audit and follow up on overdue accounts, work closely with the collection agency (when necessary) and document all collection activity for audit and review. Revenue Services management will approve the referral of accounts to a collection agency.

Accounting will review the allowance for doubtful accounts, ensure all liabilities to Canada Revenue Agency are paid in accordance with legislation.

Department Heads will approve uncollectible accounts to be written off pertaining to their division.

Non-centralized accounts receivable departments

Revenue Services will perform periodic review of the aging to the GL, ensuring that any quarterly aging of receivables is reconciled, then signed off by the Manager of Accounting or designate at year-end, to ensure year-end procedures are adhered to.