Good Practice Guide No. 3. Finance Invoicing, Receipts and Debt Management

Transcription

1 Guide No. 3 Finance Invoicing, Receipts and Debt Management Version: 1.0 Revision Date: April 2008

2 Revision and Control Record Revision Number Section / Paragraph Reference Description of Change Revision Date 1 e.g e.g. New operating principle number xx e.g. Jul Research Councils' Internal Audit Service Page 2 of 6

3 Contents 1. Introduction Action Suggested Further Assistance Available Scope of the Guide Management Review of Aged Debt Report Manual Systems Income Review Credit Control Procedures - Timing Review, Escalation, Litigation and Write-off of Bad Debts... 6 Research Councils' Internal Audit Service Page 3 of 6

4 1. Introduction RCIAS has over time performed a number of audits of systems common across the Research Councils. These audits were not performed as Cross Council audits, but as separate audits in each Council. As would be expected, the scoping was similar and considered the standard controls expected within each of the systems The aim of the RCIAS Bulletins is to draw from this work and to share good practice between the Research Councils The Bulletins are colour coded under the following headings: 1.2 Action Suggested The attached pages show common issues noted, along with good practices identified within the Research Councils or the wider public and private sectors. We hope that you find this document useful, and suggest that you undertake a self audit and benchmark your own procedures or systems against the good practice identified. Please note that no response to us is required. 1.3 Further Assistance Available RCIAS are able to provide you with further information and guidance on the content of this circular. Please contact us if you wish to discuss any of the issues, or obtain further guidance. Research Councils' Internal Audit Service Page 4 of 6

5 2. Scope of the Guide Systems for invoicing for non Parliamentary grant in aid income, management and collection of debts. 2.1 Management Review of Aged Debt Report Management do not review an aged debt summary. The review of a summarised aged debt report, produced in matrix format, enables Finance management to easily judge the effectiveness of credit control procedures, to identify specific debtors issues and ensure that appropriate action is being taken to recover amounts owed. 2.2 Manual Systems We have noted some instances where staff reviewed manual files of copy invoices to identify amounts overdue. This was used even where IT systems allowed the production of reports of debts outstanding. There is a risk that such manual reviews will not identify all amounts which should be acted on, for example due to human, error or if the invoice is removed from the file incorrectly. Use of accounting system reports, showing debts by age, to identify amounts to which credit control procedures should be applied. 2.3 Income Review Councils did not have a process for detailed review of income invoiced. This was particularly important given the low focus on external income in some Councils; where it is a small proportion of total income. However, even in these cases external or non Parliamentary grant in aid income was typically found to be in the millions per year. Good practice is for Finance to review actual income invoiced compared to a profiled budget. This enables Finance to gain assurance that budget holders have invoiced for all amounts due. Research Councils' Internal Audit Service Page 5 of 6

6 2.4 Credit Control Procedures - Timing Councils were found to have formalised credit control procedures. However, these tended to be focused solely on old outstanding debts. In the past we have found there were weak procedures aimed at regular receipt and, where appropriate, chasing of debts before invoice are overdue. Councils have experienced delays with receipt of EU payments for projects. Good practice is to begin credit control procedures, usually with a statement or reminder, within the credit period. Finance, in consultation with budget managers, should coordinate, focus and ensure vigorous follow-up on receipts overdue. Legal action in line with contractual terms should be taken when appropriate. 2.5 Review, Escalation, Litigation and Write-off of Bad Debts Staff were not always aware, and did not follow, escalate or act, Councils policy and procedures for debt management. This resulted in debts not being pursued with vigour and acted upon or timely consideration of possible writ-off action. Senior management should periodically review all outstanding debt and consider and recommend write-off where appropriate. There should be a clear debt management policy and all Finance staff should be fully aware of, and understand. There should be regular review of debtors with appropriate escalation procedures to involve senior management where debt is not being recovered as agreed. Research Councils' Internal Audit Service Page 6 of 6