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Effective date
Last updated 5/7/2024

A credit memo may be issued by a vendor because the University returned goods that were ordered and received unsatisfactory, due to pricing discrepancies or any other reasons. Credit memo is a supplier's written statement indicating that funds are owed to the University, and University has a right to pay a certain amount less when the next check is issued to the vendor.

If the University has not yet paid the supplier, the credit memo can be used as a partial offset to its invoice-based payment to the supplier. If the corresponding invoice has been paid, credit memo can be used to offset future payments to the supplier for invoices for any other departments.

If the University does not anticipate doing additional business with the vendor, Accounts Payables will request a refund check from the supplier in lieu of a credit.

Because the University does not employ a formal returned goods process through a centralized unit, it is the responsibility of each department to ensure that any goods rejected or returned result in proper credit memo issued to the University. The department should also maintain accurate records of goods being shipped back to the supplier

The objectives of this policy are to:

• Establish effective internal controls and ensure proper custody over the University assets.
• Establish a standard procedure for credit memo processing.
• Assign and clarify the responsibility for various departments, Accounts Payable department and individuals involved in processing credit memos.

Provide resources that will assist University staff and suppliers in meeting the requirements of this policy.

Who is Affected by This Policy

This policy applies to all suppliers, University departments, Accounts Payable department and University staff who approve and process invoices and credit memos. As with any other payment issued by the University, standard operating procedures apply to all transactions, including credit memos. All procedures, coordination and approvals are required to take place in order to comply with set policies.

Procedure

• Credit memorandums received by departments from suppliers represent funds owed to the University and should be entered into the Workday or forwarded to the Accounts Payable Department immediately. Department may be asked to provide additional information such as a credit memo number for the corresponding invoice, and the reason for the issuance of credit memo in order to ensure proper credit memo processing. Also include Worktags: ÍÃ×ÓÏÈÉú Specified/Grant/Project Task/Gift/Cost Center/Student Organizations/Additional Worktags.
• When a credit memo is entered in Workday, the departmental expense is reduced immediately. However, the University has yet to collect the funds.
• Future invoice payments to a supplier from any department will offset credit memos if the University continues a business relationship with the supplier. Credit memo will be recorded as a reduction of the balance due for the specific supplier.
• If a purchase order was used to pay for the invoice, the credit memo can be entered against an existing purchase order if it is still open.
• When entering a credit memo, the earliest possible due date must be used in order for the credit memo to be offset for a future payment to the supplier.
• In Workday make sure to select the correct remittance address of the supplier that is selected when creating the credit memo. The company and remittance address for the supplier invoice and the credit memo address should both match.
• If a department receives a credit memo from the supplier, and all invoices for the supplier have been paid, and the department does not anticipate doing additional business with this vendor, the department must immediately notify Accounts Payable. A standard letter(s) containing verbiage required by the University collection policy will be mailed from Accounts Payable to the supplier requesting refund.
• If the department receives the refund check, it must be forwarded immediately to the Accounts Payable for processing. The department will have to reference Worktags: ÍÃ×ÓÏÈÉú Specified/Grant/Project Task/Gift/Cost Center/Student Organizations and agencies/Campus/Additional Worktags, corresponding invoice number, on the check or supporting documentation.
• Outstanding suppliers' credit balances will be reviewed weekly by the Accounts Payable Department to identify potentially uncollectible balances. Suppliers with credit balances outstanding for more than 45 days will be contacted regarding a refund.
• All reasonable efforts will be expended to collect balances owed to the University. Supplier will be contacted at least twice by written correspondence indicating that the account will be placed in collection if payment is not received by the date specified in the letter(s); Manager of University collection within the Bursar's must be copied on these correspondences. The correspondence must be sent out no more than 30 days before placing the account into collection and no more than 90 days before the last correspondence.
• Supplier's debt will be placed with an outside collection agency or referred to the Ohio Attorney General's Collection Enforcement Office for collection. The debtor will incur additional charges and collection expenses. Outside collection agencies or Ohio Attorney General's Collection Enforcement Office are used only when the ÍÃ×ÓÏÈÉú University Collection Department cannot obtain payment.
  The department will be notified by Accounts Payable that the supplier's debt is submitted to the collection agency and must agree to pay the collection fee charged by our vendor TEK Co. Collection fee is charged regardless if debt is collected from the supplier. The department will be responsible for answering questions regarding quantities, quality, prices and other details relevant to the purchase.
• Credit memo will be considered uncollectible and recommended for write off after all customary efforts to collect have been exhausted. Consistent reporting of the uncollectible credit memos is necessary to ensure the monitoring of collection effectiveness.
• The following write-off criteria has been established by the University Controller.
  • The account will have been referred to at least one collection agency and/or litigated.
  • It is reasonably estimated that the cost of collecting the debt would be equal to or exceed the amount of the debt.
  • The debtor does not and will not for the foreseeable future own or have the right to own assets from which ÍÃ×ÓÏÈÉú University could collect the debt.
  • Supplier's debt determined to be uncollectible are to be written-off when they become three (3) years old as of 6/30/xx (current year), and has not recorded payment activity within twelve (12) months prior to 6/30/xx (current year).
  • Regardless of the age of the account; legal notification that an account balance has been discharged through bankruptcy or notification of death of the debtor, will result in the balance being written off immediately.All bad debts that are written off with the exception of bankruptcy and death, are still considered due and payable in full by the debtor.