University of Minnesota  Administrative Policy

Managing Billings to and Receivables from External Customers

Policy Statement

Creating a Billing

Departments are responsible for accurate, timely billings to customers for non-sponsored receivables. Sponsored Financial Reporting (SFR) is responsible for generating accurate, timely billings to sponsors for sponsored receivables. These billings must be recorded in the University’s Enterprise Financial System (EFS) or a financial system approved by the Controller or designee. Departments should record receivables at the time the goods or services have been provided and not wait until the payment is received. Departments must have appropriate internal controls when working with accounts receivable such as separation of duties, processes to ensure appropriate payment application, and collection processes and procedures including write-offs.

Departments must select a payment term to be applied to the billing, not to exceed the term of Net 30 days unless otherwise stated in an approved contract. Sales tax must be collected (charged) that is applicable for the item or service being sold, the location where the goods or services are provided, and the customer’s tax status. Any adjustment or change to an existing invoice (credit only, credit and rebill, or chartstring correction) must be adequately documented and justified, in order to provide a complete audit trail. Departments that interface billing activity to EFS must reconcile the activity in the source system with EFS at least monthly to ensure all activity is being billed.

Receiving Payment

All payments to the University should be in US Dollars. Payment methods accepted by the University are cash, check, electronic funds transfers (EFTs) and credit/debit cards (non-sponsored only). Departments will be charged for all fees associated with EFT or credit card payments. These fees should be factored into the department’s rates and cannot be separately charged to a customer.

Collection and Write-off of Outstanding Receivables

Departments, SFR and Accounts Receivable Services (ARS) have a shared responsibility to monitor and follow a regular collection schedule with appropriate escalation actions for those receivables not paid in full within the 30 days.

ARS is responsible for the collection of non-sponsored receivables in EFS. SFR is responsible for the collection of sponsored receivables. Departments provide assistance to ARS and SFR with collection as necessary. Departments utilizing an approved financial system should establish written collection procedures and make every effort to collect any outstanding receivables. Any outstanding balance, regardless of amount or the billing system, may be referred to either the Office of the General Counsel (OGC) or collection agencies if not resolved in a specified time period.

If a customer has a pattern of non-payment to the University for sponsored or non-sponsored activity, they may be deemed not creditworthy by ARS or SFR. Departments may choose to discontinue providing goods or services or halt research until such a time as the internal credit rating has improved and the risk of non-payment has decreased.

Late fees may be charged on past due balances as provided by law and as permitted by contract.

Fees paid to collection agencies will be deducted from any monies collected from the customer.

Departments must use a non-sponsored chartstring to cover expenses associated with a receivable that has been deemed uncollectible after all reasonable collection efforts have been taken. Departments are responsible for designating the non-sponsored chartstring to which these expenses will be charged. If the receivable (or portion thereof) is subsequently collected from the customer/sponsor, the collected amount will be credited to the chartstring that covered the expenses. Write-offs over $500 must be approved in advance by the University Controller or designee.

  • Sponsored receivables– Departments are responsible for moving the uncollectible costs to a non-sponsored chartstring. If the department does not move the uncollectible costs, SFR will move the uncollectible costs to the default program and charge the department a fee to perform this service.
  • Non-sponsored receivables– ARS is responsible for processing the write-off of non-sponsored receivables.


Student accounts receivables are handled separately from this process.

Reason for Policy

To maximize the University's cash flow through the timely collection of receivables; minimize exposure from uncollectible receivables; and to increase the integrity of the financial statements through consolidation of receivables and revenues. To comply with contractual obligations and rules of the University’s banks and financial institutions. Promotes oversight and accountability for uncollectible costs by ensuring that all costs incurred are managed by the responsible units. Timely movement of uncollectible costs will result in proper classification of expenses, which will lead to more accurate and complete financial information, and increased compliance with regulations regarding costs and cash management.


Subject Contact Phone Email
Primary Contact(s) David Laden
Nicole Pilman
[email protected]
[email protected]
Sponsored Receivables Nicole Pilman 612-624-3848 [email protected]
Non-sponsored receivables David Laden 612-624-0929 [email protected]
External Sales Keith Jansen 612-624-5540 [email protected]
Deposits Office of Investments and Banking 612-624-5558 [email protected]
Responsible Individuals
Responsible Officer Policy Owner Primary Contact
  • Controller
  • Director of Accounts Receivable
  • Director of Sponsored Financial Reporting
  • David Laden
    Director of Accounts Receivable
  • Nicole Pilman
    Director of Sponsored Financial Reporting


Accounts Receivable
Amounts due the University of Minnesota for credit sales of goods or services to external customers, including sponsors of University research. An account receivable is created upon the shipment of a product, rendering of a service, accumulation of costs, or satisfaction of a performance step as outlined in an agreement. An account receivable may be due or not yet due; a receivable that is due is a claim against a customer that the University has the right to collect at the present time.
Accounts Receivable Aging
The starting point for the evaluation of the collectability of accounts receivable and often triggers appropriate actions to mitigate the potential for bad debt. Summarizes receivables into aging categories of 0-30 days, 31-60 days, 61-90 days, 91-120 days and over 120 days.
Allowance for Uncollectible Accounts
An estimate of amounts that will likely not be collectible, intended to accomplish these two results: a) to charge the loss for accounts that prove to be uncollectible against the period that caused the loss; and b) to show the estimated realizable value of the customers' accounts.
Budget Overruns
Allowable and allocable direct costs that are incurred and charged to a sponsored project, but are in excess of the awarded amount.
Any entity that is not “Regents of the University of Minnesota”. Can include individuals (including faculty, students, and staff), businesses, non-profit organizations and foundations, other colleges or universities, and government agencies that acquire goods or services or contract for research with University departments, auxiliaries, or ISOs. This includes some organizations which are closely affiliated with the University of Minnesota but are separate legal entities. Some examples include: The University of Minnesota Foundation, University of Minnesota Alumni Association, University of Minnesota Physicians, and Registered Student Organizations.
Credit Balance
A balance due to a customer as a result of returned goods previously paid for by the customer, or the granting of later credits and allowance for various reasons such as unsatisfactory performance. These balances represent obligations of the University that will have to be satisfied either by cash payments or providing a replacement good/service.
An internal designation by the University after evaluating the payment history of an individual customer.
Default Program
Chart of Account program for uncollectible costs on sponsored projects.
Function Code
Chart of Account value that is a required attribute to all Program and Project values and indicates the purpose of a project or program, such as instruction or research.  Answers the question, "How does this transaction accomplish the mission of the University?"
The document that notifies the customer what is owed for a particular transaction or time period.
Letter of Credit
A commitment, certified by an authorized certifying officer of a Federal program agency, specifying a dollar limit available to a designated recipient organization. Weekly or monthly (depending on federal agency) draws on a cost reimbursable basis via the federal agency system.
Program Income

Gross income earned by the recipient that is directly generated by a sponsored activity or earned as a result of the award (from OMB Uniform Guidance 200.80). Examples of program income include:

  • Income from the collection of industry membership fees.
  • income generated from the use, or rental of equipment purchased or fabricated with project funds during the project period.
  • proceeds from the sale of software, CDs, or publications during the project period.
  • income from the sale of research materials such as animal models during the project period.
  • fees from participants at conferences or symposia during the project period
  • sales of products with an accompanying material transfer agreement during the project period.
  • royalties from patents and copyrights [see special situations].
  • income from fees for service performed or use of resources such as laboratory tests during the project period.

Program income does not include for example:

  • patient care credits
  • interest earned on advances of federal funds
  • credits, discounts, rebates
Revenue Recapture Program
A program authorizing the Minnesota Department of Revenue to recapture taxpayer refunds and apply them to debts the taxpayers owe to other state agencies, the University of Minnesota and to certain local governmental units. A debtor under this program is an individual person who is obligated to pay a debt to a claimant agency.
Sponsored Project
Any externally funded activity that is governed by specific terms and conditions and must be separately budgeted and accounted for subject to terms of the sponsoring organization. May include grants, contracts (including fixed price agreements), and cooperative agreements for research, training, and other public service activities.
Unallocable Costs
Costs that are allowable but are not assignable to a sponsored project because they do not provide relative benefit to the project, or were otherwise not allocable under sponsor guidelines or the specific sponsor agreement.
Unallowable Costs
Costs that cannot be charged to a sponsored project per sponsor guidelines or any other costs incurred by the University that cannot be included in the development of the indirect cost rate charged or as a direct cost to a federally sponsored project, nor included in ISO/department recharge rates.
Uncollectible Accounts Receivable
An amount for which payment from a customer is not expected, for reasons such as disputes over pricing; contractual terms; budget overruns; allowability; allocability; performance or receipt of product; bankruptcy or other legal proceeding.
Uncollectible Costs

Any costs charged to a sponsored project that will not be reimbursed by the sponsor. They include:

  • Budget overruns;
  • Unallowable costs;
  • Unallocable costs; and
  • Other uncollectible costs that do not meet any of the above criteria, but that the sponsor is otherwise unwilling or unable to pay, (e.g., amounts that are disputed by the sponsor, or amounts deemed uncollectible due to sponsor bankruptcy).
Any organizational entity within the University that has budgetary authority. Includes, but is not limited to colleges, departments, centers, institutes, offices and programs.
The actual removal of an amount from the accounts receivable subledger once it has been determined that the customer will not pay an amount owed.


Accounting Services
Set up initial uncollectible programs using the appropriate function codes of non-sponsored research, non-sponsored instruction, and non-sponsored public service.
Accounts Receivable Services (ARS)
Responsible for customer maintenance, distribution of non-sponsored invoices, non-sponsored accounts receivable, payment application, billing correspondence, collections, and write-offs (non-sponsored in EFS). Receive and process checks (for non-sponsored accounts receivables) returned by the bank because of non-sufficient funds or funds drawn on a closed account.
Reviews and approves use of a financial system other than the University’s Enterprise Financial System (EFS) for recording billings and accounts receivable. Approves write-offs over $500. These approvals may be delegated to Accounts Receivable Services or Sponsored Financial Reporting.
Sponsored Financial Reporting (SFR)
Responsible for managing the external financial reporting and invoicing requirements of the University’s sponsored projects. Other functions include payment application, sponsored accounts receivable, collections, letter of credit draws, audits and close outs of sponsored projects. Receive and process checks (for sponsored accounts receivables) returned by the bank because of non-sufficient funds or funds drawn on a closed account.
Sponsored Projects Administration
Ensure that contracts for sponsored projects are negotiated to minimize the risk of non-payment of receivables by sponsoring organizations. Provide guidance to Principal Investigators, Unit Heads and Administrators, and others as appropriate on issues that could result in uncollectible costs being charged.
University Budget and Finance
Monitor the elimination of deficits in the default uncollectible programs.
University Clusters and Departments

Request new or changes to existing customer records. Enter non-sponsored billing information into the financial system (EFS or approved department system) at the time the goods or services have been provided ensuring confidentiality and accuracy. Collect sales tax that is applicable for the customer's tax status, location, and the item or service being sold. Enter non-sponsored billing adjustments and provide appropriate justification for the adjustments and obtain departmental approval for the adjustments prior to entry. Review outstanding receivables on a regular basis and:

  1. Communicate any known customer/sponsor issues or inaccuracies to ARS or SFR.
  2. Consider if delivery of products, services or research activities should be suspended as a result of the nonpayment of invoices.
  3. Discuss if a write-off of the unpaid receivable is appropriate with ARS or SFR.
  4. Advise and work with Principal Investigators so that uncollectable costs are not charged to sponsored projects
  5. Advise and work with Principal Investigators and Unit Heads to identify non-sponsored funds against which uncollectible costs can be applied.
  6. Move uncollectible and unallowable costs to the appropriate non-sponsored program according to the Administrative Policy: Processing, Documenting, and Approving Financial and Accounting Transactions.

For those departments with an approved department system: Record receivables in department system. Reconcile to EFS. Collect on outstanding receivables and write-off uncollectible receivables as appropriate.

Dean's Office
Work with Unit Head to resolve open issues on agreements concerning responsibility for uncollectible costs incurred on cross-college sponsored projects. Provide oversight and take corrective action as needed to resolve issues concerning uncollectible accounts receivable.
Principal Investigator
Responsible for sponsored projects, ensure that risks of incurring uncollectible costs are managed appropriately by complying with all sponsor terms and conditions and University policy. Identify agreements concerning responsibility for uncollectible costs incurred on cross-college sponsored projects. If uncollectible costs are charged; work with Unit Head to ensure availability of non-sponsored funds against which those costs can be applied. Ensure that processes are followed to provide timely resolution and prevent future recurrence. Assist in resolution of quality, quantity issues to minimize uncollectible costs.
Unit Head
Ensure the availability and authorize the use of non-sponsored funds to cover uncollectible costs. Work with Principal Investigators to establish agreements concerning responsibility for uncollectible costs incurred on cross-college sponsored projects. Provide oversight and ensure that mechanisms are in place and utilized to ensure timely resolution of uncollectible accounts receivable.



January 2020 - Comprehensive Review:

  1. Clarified existing procedures;
  2. Included minor editorial changes for clarification;
  3. Improved the flow of the policy statement by rearranging the information.
  4. Updated the definition of program income to conform with OMB Uniform Guidance 200.80.
  5. Combined the Establishing Non-Sponsored Programs for Uncollectible Costs on Sponsored Projects procedure into the Moving Uncollectible Costs to Non-Sponsored Programs procedure.
July 2015 - Comprehensive Review, New Policy. Merges content from three policies into one. Includes language regarding payment methods. Provides new procedures for billings, payments and collections.
April 2010 - Updated Contacts Section.
July 2008
Accounts Receivable