The Kuali Financial System (KFS) Accounts Receivable module does not allow invoices or credit memos to be posted to a previous fiscal year. All invoices and credit memos that should be posted to fiscal year 2023 must be created and approved prior to July 1. Invoices created must also be for services provided and goods sold in fiscal year 2023 and should not be for pre-billing or prepayments for expected fiscal year 2024 activity. If you do not create the invoices and credit memos in June, you will need to accrue the receivables, which can only be done if your unbilled invoices are included on an Auxiliary Voucher (AV) that totals more than $100,000, per recent AV restrictions announced by the University Accounting & Reporting Services group. For assistance, please contact Accounts Receivable at firstname.lastname@example.org.
According to IU policy FIN-ACC-500, Accounts Receivable balances over 12 months old and lacking current productive activity will be written off even if the invoices are placed with a collection agency. Any invoices 365 days old prior to June 30, 2023 should be written off by the billing organization no later than close of business on June 16, 2023. Please also add collection notes in the Notes and Attachments section of any KFS invoices that will be 90+ days old prior to fiscal year end.
Please ask the following questions prior to writing off an invoice to ensure you are using the correct edoc in KFS:
- Is the invoice a duplicate or need to be reversed? If the answer is yes, and the invoice is from the current fiscal year, please use the Invoice Correction edoc to reverse the invoice. This can be completed by clicking the ‘Error Correction’ button at the bottom of the invoice. If the invoice is from a prior fiscal year, please email email@example.com for additional information.
- Was the invoice short paid due to returns, price adjustments, or to remove open balances that will not be received due to costs associated with doing business, i.e. bank fees deducted for wire-transfer payments? If the answer is yes, use a Credit Memo edoc to clear the remaining balance of the invoice.
- Is the balance of an outstanding invoice due to non-payment stemming from the customer not being able to pay (bankrupt, dispute, unresponsive, etc.). If the answer is yes, use the Customer Invoice Write-off edoc to write off the invoice as bad debt. Please do not use the Write-Off edoc to clear small balances under $1 from invoices.
Remember…writing off an invoice does not prevent you from collecting the money from the customer!
Any department with an average non-student accounts receivable greater than $500,000, not including the allowance, must compute and record an allowance for doubtful accounts on their balance sheet. An Allowance for Doubtful Accounts is a contra asset account (meaning it either has a credit or zero balance) on the balance sheet that reduces the total receivables reported as collectible.
Non-student accounts receivable balances should be re-evaluated on an annual basis to determine whether or not an entry must be recorded. Departments are encouraged to review more frequently if there are material fluctuations in accounts receivable throughout the year.
Please send your calculations for the fiscal year ending June 30, 2023 to firstname.lastname@example.org with the subject ‘Allowance for Doubtful Accounts Calculation’ by August 1, 2023. If you do not feel calculating an allowance is necessary, then please email your reasons why no allowance is needed to email@example.com with the same subject line. For additional information on how to compute and record an allowance for doubtful accounts, please refer to ARSOP 2.0: Allowance for Doubtful Accounts.
As part of fiscal year 2023 external financial audit procedures, the university’s external auditors will be conducting testing of transactions in the coming months. Please be aware that NSAR staff may contact you directly during that time to request documentation related to this testing.