Doubtful and bad debts procedure
To ensure University staff are consistent in the management of doubtful and bad debts
Administration of doubtful debts and the write-off of bad debts for students, third parties and trade debtors.
Procedure steps and action
1. Provision for doubtful debts
Credit Management will recommend debts to be written off after all economic attempts to recover the amount have failed. Authorisation of write-offs will be performed in accordance with the Delegations policy and schedules.
In accordance with Australian Accounting Standards, debtors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment.
Periodically, individual debt will be assessed for risk of debt recovery and the provision will be adjusted accordingly.
Bad debts are expensed in accordance with budgeted expenses allocation.
During the financial year estimated provision for doubtful debts is recorded based on the aged trial balance and management of debt recovery.
At the end of the year, each debt will be assessed individually and provision will be recalculated based on a history of debt recovery. In case of liquidation, receivership and insolvency the provision will always be 100%.
2. Students Debtors
Invoices are run daily by the Academic Registar’s Group and new charges become due by the last day of the month when invoices are run.
On the 7th day of a charge being overdue an NPA service indicator is automatically imposed on a students’ account.
On the 8th day of the charge being overdue, an email reminder is sent to all students who have an overdue debt greater than $2. The email address is always RMIT student email and the text of the email is standard to all cohorts of students.
On 23rd day after the charge due date, a further email reminder is sent to all students with an overdue debt greater than $10 using the same email address.
On 33rd day after the charge due date, a late payment fee will be charged to selected accounts. The late payment fee is only charged to the accounts that have an outstanding overdue debt higher than the value of the late payment fee*.
On 37th day after the charge due date, a final reminder letter is sent to the student’s home address. This letter is only sent if the overdue debt is greater than $25.
If all processes listed above fail to collect the debt and the debt is greater than 61 days overdue, the debt is transferred to an external debt collection agency for collection. This is applicable to all cohorts with debt over $50. Standard debt collection process applies thereafter.
* Late payment fee is a subject to an annual review as all fees and charges.
3. Trade Debtors
The cut off period for Trade Debtors is the first working day after the end of the month.
On the fifth working day of the first overdue month a reminder is sent by email to all customers that have an overdue debt regardless of the value. At the same time the Credit Management team follows up all Trade Debtors with overdue debt via phone.
14 days after the email and in order to give debtors 10 days to pay an overdue debt, a standard letter is sent to all Trade Debtors’ mailing address. At this time the account is closed for posting and no further invoices can be raised for Trade Customers until the outstanding debt is paid.
At the end of each month details of overdue debt are sent to schools advising them about the size of the debt and possible write off.
4. Bad debts
When all debt collection efforts fail, including action by an appointed debt collection agent, a write-off may be initiated.
Once the write-off is approved and the debt is removed, any subsequent recovery will be recorded against the relevant business unit.
Subject to Limitations of Action Act 1958, RMIT may legally enforce recovery of the debts at a later date, up to six years from the date of write-off. The Credit Management Department will periodically review debts that have been written off.
Details of write-offs will be provided to the Tax Accountant to determine if any GST refund is claimable from the Australian Taxation Office.[Next: Supporting documents and information ]