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Office of the University Controller Indiana University

Accounts Receivable

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 2024 must be created and approved prior to July 1. Invoices created must also be for services provided and goods sold in fiscal year 2024 and should not be for pre-billing or prepayments for expected fiscal year 2025 activity per the Revenue Recognition principle discussed in the Accounting Principles Standard. If you do not create the invoices and credit memos in June, you will need to accrue the receivables to the unbilled KFS AR object code 8122, 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 nonstdar@iu.edu.

Non-Student Accounts Receivable Write-Off Deadlines

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, 2024, with no recent payment activity, should be written off by the billing organization no later than close of business on June 14, 2024. 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. A list of outstanding KFS AR invoices can be obtained by running the Accounts Receivable Aging and Detail Report.

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 nonstdar@iu.edu for additional information.
  • Was the invoice short paid due to returns, price adjustments, bank fees, or currency conversion? Are there small open balances remaining 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 Customer 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; instead, a Customer Credit Memo (CRM) edoc should be used with the reason code ‘Small Balance’ to clear small balances from the invoice.
  • Note: If a payment has been received and applied directly to your account but should have been applied to an invoice that remains outstanding, then the payment amount needs to be moved back to our KFS account (6812950, OC 8015) so we can properly apply the payment to the outstanding invoice to relieve it. A General Accounting Adjustment with a From/From transaction should be completed immediately to move the funds. Email nonstdar@iu.edu with your GAA document number and invoice that should be paid off.

Remember…writing off an invoice does not prevent you from collecting the money from the customer!

Allowance for Doubtful Accounts

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, 2024 to nonstdar@iu.edu with the subject ‘Allowance for Doubtful Accounts Calculation’ by August 1, 2024. If you do not feel calculating an allowance is necessary, then please email your reasons why no allowance is needed to nonstdar@iu.edu 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.

Non-KFS Accounts Receivable Write-Offs for FY24

Invoices generated outside of the KFS AR module are subject to Policy FIN-ACC-500: Write-Off Accounts. Per the policy, accounts receivable balances over 12 months old and without a promise to pay signed by the debtor or a current payment plan must be written-off the general ledger and not included in the June 30, 2024, receivables. Debts may be written-off prior to 12 months if they are coded as deceased, bankrupt or if collection efforts have been exhausted.

As a reminder, by August 10, 2024, all organizations using an external AR system (reconciled to object code 8119) must supply Non-Student Accounts Receivable with a detailed listing of all write-offs for the period ending June 30, 2024. This does not include invoices already in the KFS AR system.

The write-off submission should include the following information:

  1. Total Credit Sales for FY 2024

  2. June 30, 2024, Aged Receivables Report from your external AR system

  3. List and justification for retaining any accounts over 12 months old without productive activity

  4. Information detailing write-offs. Use the Support for Annual Write-offs template to capture this information.

    • Customer name and address
    • Invoice number
    • Invoice date
    • Original invoice amount and remaining unpaid balance
    • Explanation for write-off

Submit reports to nonstdar@iu.edu. For more information, please review Policy FIN-ACC-500.

Audit

As part of fiscal year 2024 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.