COLLECTING ACCOUNTS RECEIVABLE - 8293
Agencies/Departments shall immediately notify debtors and collect amounts owed to the state in the most effective and efficient manner. Agencies/Departments should have written policies and procedures in place to ensure that past due receivables are addressed promptly and in a manner that is cost-effective to the state as outlined in SAM Section 8291.
Accounts receivable (AR) collection procedures differ depending on the customer type of the receivable. The procedures are specified in the following SAM sections:
- Recovery Of Outstanding Travel Advances – SAM Section 8116.1.
- Collecting Non-Employee Accounts Receivable - SAM Section 8293.1.
- Collecting Employee Accounts Receivable - SAM Section 8293.2.
- Collecting From Another State Agency/Department - SAM Section 8293.3.
ARs include revolving fund advances issued to employees. The longer ARs and revolving fund advances remain outstanding, the greater the risk they may become uncollectible, resulting in the loss of state funds.
If an AR is from a separated state employee, agencies/departments shall follow the collection procedures for non-employee ARs. Agencies/Departments shall submit a Personnel Action Request form, STD 680A, to the State Controller’s Office, Personnel and Payroll Services Division (PPSD), and request notification if the separated employee reenters state service. For information on payroll accounts receivable recovery from separated employees, see SAM Section 8593.3.
Collection Best Practices
Agencies/Departments should use collection best practices that are cost-effective and consistent with their program goals and legal authority. Below are collection best practices to use when practical:
- Obtain identification numbers from customers when possible (e.g., federal identification number, driver’s license number, or other taxpayer identification number).
- Contact the debtor as soon as the debt is due, but no later than 30 days.
- Send an invoice and three separate notices of nonpayment (i.e., dunning letters). The agency/department should send the first notice within 30 days of when the receivable arises and the remaining notices at 30-day intervals. Agencies/Departments may send notices at intervals sooner than 30 days if it improves the chances of receiving payment. The notices should include the potential consequences of not paying timely.
- Consider a payment plan that allows debtors to pay back their debt over time when the debtor is unable to pay in full.
- Withhold permits/licenses/registrations until outstanding receivables are paid.
- Offset amounts owed to a debtor by using it to pay outstanding receivables. For information on offset procedures, see SAM Section 8293.4.
- Consult with the agency/department legal staff to determine if legal action is appropriate and cost-effective.
- Consider using private collection agencies to supplement collection efforts if it is more cost-effective than internal collection efforts.
- Allow debts to be paid through electronic payments (e.g., credit cards, debit cards, and other online methods) when feasible.
Statute of Limitations
The statute of limitations to collect on different types of receivables varies. Agencies/Departments should be aware of the statute of limitations to collect on their specific receivables and monitor outstanding debts to allow sufficient time to conduct thorough collection efforts.