UPHL DEBTORS MANAGEMENT POLICY - uphl.co.ug DEBTORS' MANAGEMENT POLICY - BOARD...UPHL DEBTORS...

2nd Dec 2013

User

UPHL DEBTORS MANAGEMENT POLICY



TABLE OF CONTENTS PREAMBLE ...................................................................................................................................................... 3

Review ............................................................................................................................................................ 5

1.0 BACKGROUND…………………………………………………………………………………………………………………………………….5

2.0 DEFINITIONS OF TERMS .......................................................................................................................... 5

3.0 POLICIES AND PROCEDURES ................................................................................................................... 6

3.1 Debtors Policy and Guidelines ................................................................................................................ 6

3.2 Purpose…….. ………………………………………………………………………………………………………………………………………6

3.3 Objectives of the debtors’ policy ........................................................................................................... 7

4.0 RAISING INVOICES AND CREDIT NOTES .................................................................................................. 7

5.0 CREDIT TERMS AND CONDITIONS .......................................................................................................... 9

6.0 POLICY DETAILS ...................................................................................................................................... 9

7.0 DEBTORS RECOVERY PROCEDURE ....................................................................................................... 10

8.0 Collection Agency ................................................................................................................................. 10

9.0 DOUBTFUL DEBTS ................................................................................................................................ 11

9.1 Bad debts…………….. ............................................................................................................................. 11

9.2 Authorization for writing off bad debts ............................................................................................. 11

9.3 International/local debtors ................................................................................................................ 12

10.0 SCHEDULES AND ATTACHMENTS ....................................................................................................... 13

Schedule 1 - Raising a Debtor Invoice Pathway ........................................................................................ 13

Schedule 2 - Debtor Invoice Collection Action Pathway ........................................................................... 13

Attachment 2 - Request for Extension Not to Send Invoices to Collection Agent ................................... 13

Attachment 3 - Write Offs for Bad Debts Form ......................................................................................... 13

Attachment 4 - Monthly Progress Report on Overdue Debtor Invoices > 30 Days .................................. 13


PREAMBLE

Uganda Property Holdings Ltd. inevitably needs a debtor’s policy given the nature of its

investment in properties and its importance to cash flow.

The main goal of this policy is to limit receivables’ ageing to no more than 5% beyond 30 days

and bad debts to less than 0.5 % of Revenue collections.

At the same time, it will ensure customer satisfaction through flexibility but taking prudent risk

without affecting our cash flows.

The policy allocates responsibilities to various staff but the overall responsibility lies with the

Accounting Officer.

Before services are rendered on credit, contractual agreements shall be signed, properly filed

and the Tenant’s ledger opened.

Bills and invoices shall be generated by the 2nd day after the due date and shall be delivered to

Tenants not more than 3 days after the due date.

Invoices become overdue 15 days from the date of delivery and all rentals shall be paid a

month/quarter in advance depending on terms speculated in the tenancy agreement.

For non-compliant tenants, shall be followed up by sending duplicate invoice followed by two

reminder letters at time intervals before the matter can be considered for possible legal action.

The Board shall have sole authority to write off bad debts.

That is after management is satisfied that all avenues have been exhausted before a debt is

recommended for write-off.


1.0 BACKGROUND

Uganda Property Holdings Ltd (UPHL) was established in 1998 by the Government of Uganda to

assume ownership (on behalf of Uganda Government) of all domestic and foreign located real

estate properties belonging to the Government of Uganda and to manage them sustainably.

Cabinet at its 29th sitting held on May 27th , 1998 approved ( under MIN. 312 (CT 1998)), that

M/S Uganda Property Holdings Ltd. takes over ownership of all domestic and foreign real estate

properties abroad belonging to the Uganda Government before the 1998/99 Financial Year.

Cabinet approved that the management of all local and foreign real estate properties owned by

Government, including those to be acquired in future, be vested with Uganda Property Holdings

Limited.

Uganda Property Holdings Ltd also has a mandate to carry out real estate investments within

and outside the country on behalf of Government.

UPHL has a wide base of assets including the following:

Five residential houses, thirteen ware houses, two commercial houses and two office

blocks in Mombasa; Kenya.

Four residential houses in London; United Kingdom.

Former Coffee Marketing Board complex in Bugolobi;

Silos in Jinja; and

Ware houses in Nalukolongo and Tororo.

The company has undergone significant transformation since its inception. The main focus of

the company is on business development, improved customer service, sound financial

management and institutional development.

Corporate Vision

The corporate vision is “to be a vibrant and viable real Estate Enterprise for the Government of

Uganda.”

Mission

UPHL mission is “to own and sustainably manage Government of Uganda real estate

investments”.

Operational concerns

For many years, Uganda Property Holdings Ltd. was unconsciously extending credit services to

its tenants but without documented policies and guidelines. A bigger percentage of UPHL

revenue is collected in form of debtors. The debtors mainly comprise of outstanding rental


income and government refunds. The recoverability of the debts which have been outstanding

for a long time is always in doubt.

UPHL seeks to put in place measurable performance indicators, credit limits and time lines for

collection of accounts receivable. The debtors’ policy is aimed at instituting guidelines to deal

with delinquent customers.

Although having a debtors’ policy reduces flexibility in dealing with customers, considering the

level of the company investment in receivables, it is never the less inevitable.

It is expected that with the debtors’ policy in place, collection of receivables should significantly

improve and maintenance of debtors’ records will be streamlined to yield accurate and timely

management information.

Responsible officer The Accounting Officer is responsible for the implementation and consistent application of this policy.

Review

This policy will be reviewed from time to time as and when need arises.

2.0 DEFINITIONS OF TERMS

The following definitions will apply to terms as used in this policy and procedures:

Bad debt. Is an amount owed to a business or individual that is written off by the creditor as a loss if proved to be uncollectible.

Bad Debt Write-offs are those debts where all recovery procedures described in this

policy have been deployed and exhausted, and the outstanding debts accompanied with

a written report and approved by the Board, are considered not recoverable.

Credit means the provision of documented rental and other services to the tenants before payment.

Credit Notes are documents substantiating adjustments to and cancellations of an

invoiced amount.

Debtors are all persons, businesses and organisations to which UPHL has provided

billable rental services on credit.

Doubtful debts are that proportion of total outstanding debtors which through

experience is reasonably considered potentially uncollectable.

Finance is the UPHL’s Finance Department.


Officer is a UPHL employee from any country office within UPHL, who is initiating or

approving a Debtor invoice or credit note.

Online is the process of raising a debtor invoice/credit note or approving a debtor

invoice/credit note electronically within the Finance system.

Country office includes, but is not limited to departments and branches within the UPHL

who provide services to tenants on credit.

Outstanding invoices are invoices that have not yet been paid for the rental services provided on credit.

Overdue invoices are invoices that have not been paid within the UPHL’s standard credit

arrangements and in accordance to this policy.

UPHL means the company “Uganda Property Holdings Limited”.

Veda is a debt collection letter.

3.0 POLICIES AND PROCEDURES

3.1 Debtors Policy and Guidelines

UPHL Ltd is responsible for the operation of the debtors’ policy and debtor administration. This

document provides guidelines and information for UPHL’s debtors’ Policy and management.

This policy is to be read in conjunction with related compliance legislation, other business

policies and procedures.

The policy applies to all cases where UPHL finds itself providing rental services to tenants on credit.

3.2 Purpose

To govern the action for the management of UPHL debt within the legal framework of UPHL and

to establish a framework that will ensure:

• Efficient and effective recovery of rental revenue from all UPHL’s tenants;

• Establishment of an effective communication system to all UPHL’s country offices,

especially in respect to credit control;

• Provision of efficient and effective rental and other services to UPHL’s tenants; and

• Maintenance of adequate liquidity and cash flows at all times.


3.3 Objectives of the debtors’ policy

The objectives of the Debtor management policy are to:

• Increase the level of compliance with the tenancy agreement on the part of tenants by way of limiting outstanding debt per tenant, debtor and ageing.

• Intensify debt collection through appropriate rigorous, cost efficient and effective means.

• Ensure that debt assets inclusive of debts arising by virtue of a service, are adequately

monitored, reported and controlled.

• Maintain high standards for customer service at all times.

• On the application of the policy, the key principle of debt management is the early detection, reporting and pursuit of all debt.

• Ensure the policy is applied consistently across all tenants, maintaining ethical, fair and

credible administration.

• Ensure that UPHL staff exercise discretion and apply the policy by ensuring that debtors in similar circumstances are treated equally. They will be responsible for identifying situations where the strict application of the policy would yield undesired results, for example where it would be inconsistent with this policy, unjust or unreasonable. In such cases, the matter is to be referred to management for further direction. Situations which may be considered for referral include, cases which may have substantially detrimental economic and financial impacts on the UPHL business including effects on capital investment. Action which may contradict the intention of the UPHL business’ vision and / or its Mission and possible impact on its professional standing.

4.0 RAISING INVOICES AND CREDIT NOTES

4.1 Adding or modifying a debtor

Before an invoice can be raised, country offices must ensure that the tenant in question

exists on the UPHL Finance system.

If the tenant does not exist on UPHL Finance system, country offices must create a new

tenant in accordance with the “User Guide to Creating debtors on Finance system”.

The creation and approval of new tenants must be effected in accordance with this debtor’s policy and through UPHL’s Finance system.

If email addresses, postal addresses, telephone and fax number debtor modifications

are required, an email with the modification details will be forwarded to the Head of

Finance as per the user guide and documents must be filed to that effect.


4.2 Raising Invoices Online

UPHL Country offices are to raise, approve and process all invoices on the UPHL Finance

system in accordance with the raising debtor invoice manual – Accounts Receivable’

Invoices are to be approved in accordance with the Accounts Receivable Invoice and

Credit Note Authorisation procedures.

All debtor invoices are to be raised a month in advance that is before services are

provided. This should allow UPHL to lay claim for payment.

(The decision pathway to raise an invoice is shown diagrammatically in Schedule 1,

“Raising a Debtor Invoice Pathway”).

4.3 Request for Part Payments

Requests for part payments require a separate invoice for the period in question or in

accordance with the payment schedule agreed between the Country offices’ manager

and the tenant.

The principle of part payment should not exceed three installments. However, special

cases of installment payments may be considered on their merits.

4.4 Raising Credit Notes

Where an invoice requires to be cancelled or adjusted, Country offices must process a

credit note on the UPHL Finance system in accordance with the “finance Manual – to

raise and approve Credit Notes”.

Credit Notes are to be approved in accordance with the Accounts Receivable Invoice

and Credit Note Authorisation Schedule.

Failure to do this may result in collective and disciplinary action being initiated appropriately.

4.5 Documentation Substantiation

It is the responsibility of a Country office to maintain all supporting documentation when

raising an invoice or credit note for any tenant.

As supporting documentation is held by a Country office, all initial enquiries regarding


invoices and credit notes will be referred to the Head of Finance for resolution.

5.0 CREDIT TERMS AND CONDITIONS

The UPHL’s standard credit arrangement with its debtors is that payment will be made in full within 15 days of invoicing.

However Country offices are free to make arrangements with debtors for earlier payment of invoices as appropriate.

Country offices must not make arrangements with debtors for later payment of invoices

on the tenancy agreements without prior approval from the Accounting Officer.

The Debtor invoice collection pathway is shown diagrammatically in Schedule 2,

“Debtor Invoice Collection Action Pathway”.

6.0 POLICY DETAILS

Debtors must be followed up on a monthly basis by way of telephone, physical inspection

and or in writing.

Tenants’ ledgers must be maintained, updated and monitored on a monthly basis. All

outstanding arrears and debtor collection reports must be generated and submitted by the

seventh day of the month.

Debtors shall get the initial letter of outstanding amount and given only two reminders. The

third letter will be a Debt Collection letter from the Debt Collector.

If the tenant (debtor) enters into a payment plan then they will not be penalised, unless the

Tenant defaults on their arrangement, then a penalty is charged immediately. (Need to

update arrangement letter to include this clause). This payment plan must be in writing and

must be monitored weekly or monthly as per agreement.

Tenants will be sent to the debt collector after there is no response from Veda letter, and

such action must be approved by the Accounting Officer.

If a tenant is to be away, i.e. out of the premises for some time, he/she must give detailed

payment arrangement in respect to current and any outstanding debt, showing commitment

of how these payments are to be made in compliance with the agreed terms and conditions.

Management meeting to be held on a monthly basis and debtor’s reports emailed to

management for further action.

Tenancy agreements must be regularly scrutinized for expiry dates and subsequent renewal


if appropriate. If a tenant is renewing a tenancy agreement with an outstanding debt amount, then a statement must be submitted together with the tenant file to the Accounting Officer for follow up and action.

7.0 DEBTORS RECOVERY PROCEDURE

7.1 Collection Cycle

The Accounting Officer and finance department will follow the collection cycle below in respect to overdue invoices according to the intervals in the schedule below:

Invoice

1st Reminder Notice given after 15 days.

2nd Reminder Notice given after 30 days.

Debt Collection Letter is issued after 45 days.

In the event of all the above recovery measures, UPHL Ltd will take legal action

against debtor or the defaulting tenant.

8.0 Collection Agency

All action for the collection of outstanding invoices is to be undertaken by Head of Finance. Head of Finance will advise country office of all overdue invoices that have been placed

with a debt collector. Head of Finance will also supply country office with information concerning debtors who

have had a poor paying history with the company, to minimise the occurrence of debt

recovery action.

8.1 Costs of Collection

All costs of collection or any legal and associated costs incurred for debt recovery will be charged onto the defaulting tenant. Head of Finance will email the country office updating the current status of the debt in

relation to the costs incurred during the collection. If the collection process is successful, all the collection costs will be charged to the country office account. However, where recovery is unsuccessful, the costs will be met by UPHL.

8.2 Country office discussions with Debtors

Where, during the debt collection process country offices are contacted directly by


debtors seeking additional information or wishing to make arrangements for part

payment, these deliberations should be referred directly to the Head of Finance should

the account be in the hands of the debt collector.

All requests from debtors seeking extended period for payment are to be referred to the

Head of finance for action. This is to ensure that a consistent approach is taken across

UPHL and that Head of Finance is aware of all relevant details.

8.3 Compliance

The Head of Finance is to review, analyse and report monthly to management on invoices

with outstanding amounts falling in the 30 days plus category, advising on what action has

been taken to date and follow-up action planned.

9.0 DOUBTFUL DEBTS

The provision for doubtful debts will be reviewed annually and adjusted to an amount

calculated on the basis of the probability of debt collection of each individual debtor.

9.1 Bad debts

The identification of bad debt will be considered on a quarterly basis by the Head of Finance.

Balances are only to be classified as a bad debt if they meet one or more of the following criteria:

The debtor has been declared insolvent.

There is sufficient evidence to indicate that, there is little or no likelihood of the debt being recovered.

The debtor has passed away and recovery from the deceased’s estate is not

possible.

Debt has been inactive for 3- 6 or more years and all avenues have been exhausted by management to collect the outstanding debt.

All collection efforts including the use of debt collection agencies have been

exhausted. The debt is closed off as recommended by the debt collector.

Any other reason the company deems just and fitting to warrant a write -off.

9.2 Authorization for writing off bad debts

Management must be satisfied that all avenues for collection of the debt have been

fully exhausted before a debt is recommended for write-off.


The Head of Finance:

• Identifies accounts that are justly uncollectible and should be written off.

• Prepares the write-off of uncollectible debts form.

Debtors/Account name

Amount of debt.

Age of the debt.

Methods taken to collect the debt.

Reasons why it is uncollectible.

Submits the form above accompanied by a covering letter signed by the accounting

officer for the Board’s consideration and approval.

• After approval, makes necessary adjustments to relevant accounts.

All bad debt write offs must be supported by the “Write Off for Bad Debts Form”, and

substantiated with appropriate documentation. The Write Off for Bad Debts Form and

supporting documentation is to be prepared by the Head of Finance. The Head of

Finance will then send to Management who will seek approval from the Board of

Directors.

The Board of Directors has sole authority to write off all un collectible/bad debts.

The Write Off for Bad Debt Form is to be filed in debt order by the Head of Finance and

retained for audit purposes. In addition the debtor will be deactivated on the Finance

System by the Head of Finance and recorded in a register for monitoring purposes.

Under no circumstance should a Request to Raise a Credit Note be raised if the debt is bad. The write-off method for outstanding bad debts for more than three years shall be

charged from reserves. And the direct write-off method shall be used for amounts

considered immaterial.

If debts are recovered, after being written off previously, the amounts should be

deposited using the “Deposit Slip” indicating the correct accounting code to ensure

correct treatment in the accounting system i.e. bad debts recovered.

9.3 International/local debtors

This policy applies to both international and local debtors.


10.0 SCHEDULES AND ATTACHMENTS Schedule 1 - Raising a Debtor Invoice Pathway

Schedule 2 - Debtor Invoice Collection Action Pathway

Attachment 2 - Request for Extension Not to Send Invoices to Collection Agent

Attachment 3 - Write Offs for Bad Debts Form

Attachment 4 - Monthly Progress Report on Overdue Debtor Invoices > 30 Days

Schedule 1

COUNTRY OFFICE

DEBTOR

CHECK PREREQUISITES ARE MET.

NO

ARE PREREQUISITES

MET?

YES RAISE & PROCESS INVOICE IN FINANCE ONE

IN ACCORDANCE WITH THE INVOICE PROCESSING MANUAL -ACCOUNTS

RECEIVABLE.

PRINT/EMAIL INVOICE

RAISING A DEBTORS INVOICE PATHWAY

RAISING A DEBTOR INVOICE PATHWAY

DEBTOR INVOICE


DEBTOR INVOICE COLLECTION ACTION PATHWAY Schedule 2

FINANCE

COUNTRY OFFICE DEBTOR

DEBT COLLECTOR

PERFORM MONTH END RECONCILIATION

PRINT REMINDER

LETTERS

REMINDER

LETTER

NO

DOES OVERDUE

INVOICE BELONG TO REMINDER LETTER

AN INTERNATIONAL YES

DEBTOR?

YES REMINDER

FORWARD TO

LETTER

DEBTORS?

NO

FILE

EMAIL TO ADVISE PRINT “OUTSTANDING DEBTOR

COMPLETION OF

MONTH END INVOICE BY DEPT”

PROCESSING

OUTSTANDING

DEBTOR INVOICE BY

DEPT

REVIEW AND TAKE APPROPRIATE

ACTION

REVIEW AND PROGRESS COMPLETE YES DOES OVERDUE INVOICE

TAKE

MONTHLY

REPORT

BELONG TO AN

APPROPRIATE PROGRESS

INTERNATIONAL DEBTOR?

ACTION REPORT

NO

AGREE TO NO ASK FOR EXTENTION

NOT TO SEND OVERDUE

SEND TO

INVOICES >60 DAYS TO

COLLECTION

DEBT COLLECTOR?

AGENCY

YES

REQUEST FOR

REVIEW EXTENTION NOT TO COMPLETE & EMAIL “REQUEST

SEND TO COLLECTION

FOR EXTENTION NOT TO SEND TO

AND REPLY

AGENCY FORM

COLLECTION AGENCY” FORM

YES AMEND

APPROVE? NO AMEND? NO AGREE TO SEND TO

DEBT COLLECTOR.

YES FILE


FINANCE

COUNTRY OFFICE DEBTOR

COLLECTION

AGENCY

REVIEW OVERDUE

INVOICE > 30 DAYS

IS OVERDUE AMOUNT

<.5M AND OVERDUE

>60 DAYS?

YES

CANCEL/ REVERSE

AGAINST TENANT.

NO

DOES OVERDUE

INVOICE BELONG TO

AN INTERNATIONAL

DEBTOR?

NO

HAS REQUEST FOR

EXTENTION AND PAYMENT

PLAN FORM BEEN

APPROVED?

NO

SEND OVERDUE INVOICE

TO COLLECTION AGENCY

YES

YES

YES

INFORM TENANT MAY DO OWN

FOLLOW UP ACTION

REVIEW

“PROGRESS

REPORT” SENT

BY ORG UNIT

AND TAKE

APPROPRIATE

ACTION

HAS EXTENDED

DATE EXPIRED?

NO

TAKE NO ACTION

COLLECTION ACTION

INFORM TENANT FILE OR FOLLOW UP

DEBTORS INVOICE COLLECTION ACTION PATHWAY

SCHEDULE 2.VSD


UGANDA PROPERTY HOLDINGS LIMITED Attachment 1

REQUEST FOR EXTENSION AND PAYMENT PLAN FORM

I request an extension of time before placing the following invoices into the hands of the collection

agency, according to the Tenancy Agreement.

DEBTOR NAME:

INVOICE NO INVOICE DATE INVOICE

AMOUNT PAID AMOUNT EXPECTED

AMOUNT OUTSTANDING PAYMENT DATE

TOTALS

REASON FOR EXTENSION:

REQUESTED BY:

TENANT: NAME:

SIGNATURE:

CONTACT NO: DATE:

FINANCE USE ONLY

APPROVED BY: NAME:

SIGNATURE:

DATE: REASON FOR NON APPROVAL:

SUGGESTION:


“ UGANDA PROPERTY HOLDINGS LIMITED Attachment 3

WRITE OFFS FOR BAD DEBTS – ACCOUNTS RECEIVABLE

AS AT_____________________________________________

INVOICE INVOICE DEBTOR DEBTORS’ NAME WRITE OFF COST CENTER TENANT COMMENTS

DATE NUMBER CODE AMOUNT ACCOUNT CODE ACCOUNT CODE

TOTAL WRITE OFF

Prepared by: Cleared by: Approved by:

………………….. ……………………………..

……………….......

Accountant Head of Finance

Accounting Officer

Date: Date: Date:


UGANDA PROPERTY HOLDINGS LIMTED

Attachment 4 MONTHLY PROGRESS REPORT ON OVERDUE DEBTOR INVOICES > 30 DAYS

AS AT_____________________________________BRANCH…………………………………………..

DEBTOR DEBTOR INVOICE INVOICE O/S REASON FOR ACTION TAKEN. EXPECTED

CODE NAME NUMBER DATE AMOUNT OVERDUE PAYMENT DATE

Prepared by: ____________________________ Designation: __________________

Signature: _______________________________ Date: ___________

The completed form needs to be emailed by the 15th

of the month to the Head of Finance.

UPHL DEBTORS MANAGEMENT POLICY - uphl.co.ug DEBTORS' MANAGEMENT POLICY - BOARD...UPHL DEBTORS...

Documents

Transcript of UPHL DEBTORS MANAGEMENT POLICY - uphl.co.ug DEBTORS' MANAGEMENT POLICY - BOARD...UPHL DEBTORS...