Debt Recovery Page 1
AUSTRALIAN MUSEUM DEBT RECOVERY POLICY
Aim
To ensure the efficient and effective recovery of outstanding debts while maintaining a quality customer service.
Debtors’ overview
All Invoices are to be raised in the Sun Financial System. The Finance Section raises invoices upon request (Sales Invoice Request Form, available on the I:drive at I/Finance/Forms). Some operational areas such as Australian Museum Business Services (AMBS), Venues and others have direct access to Sun System to raise monthly project invoices. Invoices are raised when an amount becomes due and payable as specified in the contract or agreement of sale.
Responsibility
The Financial Accountant is responsible for overseeing Debtor Management, with the
assistance of the Finance Officer. Outstanding debts will be reviewed on a regular basis by the Finance Officer and decisions will be made as to the most appropriate debt recovery action. This can include :
Issue of regular reminders (as detailed in the Policy). Personal contact with the debtor.
Referral of matter to the Manager/Officer responsible for initiating the debt (where appropriate).
Referral of matter to debt recovery agents. Referral of matter to legal Crown Solicitor.
Accounts statements and/or copies of outstanding invoices are to be sent to all debtors on a monthly basis.
Recovery Action
A clear collection procedure is be used for the timely and efficient administration of debtors. An invoice will be issued as soon as practicable in accordance with contract conditions or other arrangements.
Debt Recovery Page 2 The following procedures will be followed to recover outstanding amounts:
Debts Due and Payable
Normal payment terms will be 14 days from the date invoice. Debts 30 Days and over
If a debt is unpaid at month end and still outstanding after a further 30 days, a statement/letter of demand requiring immediate payment will be issued (will include copies of invoices).
Debts 60 Days and Over
If the first letter of demand is unsuccessful and the debt is still outstanding after 60 days, a final letter should be issued demanding immediate payment. This letter will contain a paragraph to the following effect :
"Unless payment is received immediately, institution of recovery through either legal or other formal proceedings will commence without further notice. You are advised that you will be liable for any such costs incurred, in addition to the outstanding amount".
Referral to Australian Museum Managers/Officers
Australian Museum Managers/Officers who initiate debts within the Finance system are to be advised when routine follow up action (first and final letters of demand) taken by the Finance Section has failed to produce payment by the debtor. Managers/Officers will be advised by way of a standard advice (see Attachment A). The respective Managers/Officers will take
appropriate follow-up action directly with the debtors in addition to routine action taken by the Finance Section.
Managers/Officers will be consulted by the Financial Accountant before any action is taken to refer an outstanding debt to either the Museum debt collection agency or to the Crown Solicitor’s Office for legal action. Managers/Officers are responsible for advising the Finance Section if there is any impediment to collecting the debt and the Finance Section will take appropriate action.
Debt Collection Agency
If the final letter does not produce settlement, the debt will be referred to the Debt Collection Agency (Dun and Bradstreet) for recovery action. Prior to this action, it should be determined whether it is uneconomic to finalise recovery action due to the relatively small value of the debt. If so, the debt should be written off.
Debt Recovery Page 3 Crown Solicitor
If debt recovery through the Debt Collection Agency is unsuccessful, the Finance Manager will consider referral of the matter to the Crown Solicitor for commencement of legal proceedings. Before proceeding with this action, the Finance Manager will consider special circumstances or whether one of the conditions of Treasury Direction 450.05 applies, in which case write off action may commence immediately.
Dispute Settlement
Where payment of an outstanding debt is being disputed by a debtor, the Finance Manager will consult with relevant Museum operational staff and may then attempt to mediate a solution or alternatively proceed to recommend write-off of the debt.
The Finance Manager may accept a reasonable request for the payment of an outstanding amount by instalments, provided that a reasonable progress payment is made promptly within a specified date. Any instalment repayment program is to be documented in writing and agreed by both the debtor and the Finance Manager.
An explicit term of any such arrangement is that the failure by the debtor to pay any instalment on or before the due date will render the full amount of the debt then outstanding,
immediately due and payable. Overseas Clients
Payment or part payment in advance of delivery of services should be negotiated, where possible, with prospective clients who are based overseas. This approach recognises the potential risk of default of payment by an overseas debtor and the difficulties of debt recovery with clients based outside of Australia. Departure from this approach should be agreed by the Finance Manager and only where exceptional circumstances exist.
Client/Contract Engagement
Other than in exceptional circumstances, the Museum shall not enter into a contractual agreement to provide services for a client on a fee for service basis, where that client is an existing debtor of the Museum and has an outstanding debt/s in the 90+ day category. Exceptional circumstances would involve potential short or long term financial loss to the Museum through loss of business, where the non-payment of an existing debt is deemed to be beyond full control of the debtor (for example, where delivery of contracted service has not been fulfilled by the Museum and is in dispute).
Debt Recovery Page 4 Instances where the Museum proposes to enter into a contract with a 90+ day debtor should be referred to the Finance Manager who may approve an exemption under the Debt Recovery Policy. The circumstances regarding the proposed contract and any information in regard to the outstanding debt/s should be included in the submission. Disputed decisions may be referred through the appropriate Assistant Director to the Director for final arbitration.
Provision for Bad and Doubtful Debts
A Provision for Bad and Doubtful Debts is maintained in the General ledger, which is equal to the balance of Debtors greater than 90 days. The Provision is adjusted to reflect movement in Debtors greater than 90 days at the end of each quarter.
Writing off debts
Before a debt may be regarded as irrecoverable, one of the following conditions specified in Treasury Direction 450.02 must be satisfied:
The debtor cannot be located; or
It is uneconomic to finalise recovery action due to the relatively small value of the debt; or
The medical, financial, or domestic circumstances of a particular debtor at that time does not warrant the taking of recovery action or further recovery action; or
Legal proceedings through the courts have proved, or on legal advice or advice from Debt Collection Agency, would prove unsuccessful.
When, in the opinion of the Finance Manager, a debt is considered irrecoverable, the matter is to be referred to the Director for off. The Director has a Ministerial Delegation to write-off individual amounts up to $5,000.
Amounts in excess of $5,000 but below $20,000 must be referred to the Director-General, Department of Arts, Sport and Recreation for approval to write-off. Amounts in excess of $20,000 must be referred to the Minister for approval to write off.
When a debt has been written off, the Finance Officer is to make all necessary entries in the accounting system. Details of written off debts are to be held on file.
On no account will a debtor be informed that an outstanding debt has been written off. If the circumstances of a debtor change, then further action to recover the debt should be taken if it is considered financially viable to do so.
Debt Recovery Page 5 Attachment A Memo Date: _________________ To: ________________ Department: ____________ From: Finance
Subject: Outstanding Debts
The Australian Museum Debt Recovery Policy allows for matters relating to outstanding debts to be referred to the Manager/Officer responsible for initiating the debt, where routine follow up action by the Finance Section has been unsuccessful.
Attached is a report detailing debts originated by your Branch which are outstanding. Recovery action by the Finance Section has, to date, failed to produce payment. Could you please contact the client/s to expedite payment of the debt.
Please provide information as to progress/outcomes of your recovery actions to the Finance Section by the end of this month. Note that this information is included in regular monthly reports to the Museum Executive and the Trust’s Finance and Audit Committee.
Please also note the provisions of the Debt Recovery Policy that discourage further business with a client until all outstanding debts are settled.
Thank you
Finance Officer Tel: 02 9320 6213
Debt Recovery Page 6
Attachment B Debt Recovery Process Flow-Chart
Invoice issued to debtor by Finance staff
Finance issues ‘30 Day’ statement/letter of demand
Finance issues ’60 Day’ final notice
Invoice Paid Paid
Invoice Not Paid
Invoice Paid
Invoice Not Paid
Invoice Paid
Invoice Not Paid Refer to relevant Manager/Officer
for direct follow-up with debtor
Refer to Debt Collection
Agency
Invoice Paid Invoice Not Paid
Decision to either refer to Crown Solicitor for legal action or
write-off debt
Invoice Paid
Debt written off Is debt ‘uneconomic’ to recover
due to small amount?
No Pai d Yes Pai d
