Procedure

BUSINESS MANAGEMENT SYSTEM No.

PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

Southern Africa
PROCEDURE FOR ACCOUNTS RECEIVABLE

Rev.
Approval Name Signature Date
No.

Revision Date : 04.2024 Page 1 of 9 Rev. 2

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 Procedure
BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

CONTENTS

PURPOSE 3

SCOPE 3

REFERENCE 3

ABBREVIATIONS 3

DEFINITIONS 3

ROLES AND RESPONSIBILITIES 5

PROCEDURE 5

APPLICABLE DOCUMENTS 6

RECORD CONTROL 7

REVISION CONTROL 8

PROCESS FLOW 9

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 Procedure
BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

1. PURPOSE

1.1 The purpose of this procedure is to provide reference and procedural guidelines for the
management of accounts receivable activities.

2. SCOPE

2.1 The procedure applies to all employees and legal entities across Southern Africa

REFERENCE

3.1 Customer Management Policy

3.2 Financial Statement Close Policy
3.3 Delegation of Authority Matrix
3.4 Google Shared Drive Naming Convention procedure

3. ABBREVIATIONS

4.1 AR - Accounts Receivable

4.2 BU - Business Unit
4.2 CEO - Chief Executive Officer
4.3 CFO - Chief Financial Officer
4.5 GM - General Manager
4.6 FM - Financial Manager
4.9 ERP – Enterprise Resource Planning

4. DEFINITIONS

Definition Description

Accounts Receivable/AR The balance of money due to legal entity for goods or services
delivered or used but not yet paid for by customers.

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 Procedure
BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

Debtor A person or organization that owes money to a legal entity.

Bad debt An outstanding sum of money owed to or its subsidiaries which

has not been paid despite repeated efforts to collect the debt
(deemed irrecoverable) or it is uneconomical to pursue the debt
further.

Bad debt provision This is a provision which is made in ’s accounts against

outstanding income which may not be collectable. It ensures
that future periods’ financial results will not be adversely
impacted if debts need to be written off.

Dunning The process of communicating with customers to ensure the

collection of outstanding accounts receivable invoices.

Handover/handed over The handover of the debt from the Legal department to a debt
collector or external legal counsel for further action

Letter of Demand A letter sent to a debtor giving notification that the terms of debt
should be met within a certain period.

Line Management Senior and middles management and heads of department

Overdue debt has not been paid within payment terms.

Payment terms A specified timeframe in which an invoice is required to be paid.

Statement Summary of open invoices against a customer.

Uncollectible Balance The portion of an account receivable for which all efforts to
collect the balance have been exhausted and any additional
cost or effort to collect would exceed the expected amount to
be recovered.

Write-off This is a process of removing irrecoverable debt (amount)

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BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

owed by a debtor after exhausting all avenues available to

effectively collect the debt.

5. ROLES AND RESPONSIBILITIES

6.1 It is the responsibility of Accounts Receivable:

● Mail invoices to customers, unless other arrangements have been made.
● Processing of receipt from customer timely.
● Mail account statement to customers.
● Retain all supporting documentation (e.g. customer purchase order, sales order, delivery etc.).
● Regularly review accounts receivable aging reports to identify payments and delinquent
customer accounts.
● Monitor and resolve issues related to open receivables.
6.2 It is the responsibility of the Line Management, finance and legal department to oversee
collection efforts.
6.4 It is the responsibility of the Financial Manager to identify and recommend accounts to be
written off.
6.5 It is the responsibility of the CFO and CEO to approve accounts to be written off.

6. PROCEDURE

7.1 ALLOCATION OF PAYMENTS

7.1.1 Bank statements must be extracted from the bank on a daily basis by Accounts Receivable.
7.1.2 Payments received from customers must be allocated to the respective customer's
account against the individual invoices.
7.1.3 Remittance advice must be requested from the customer to ensure allocation of
payment against the correct invoices. Payment will not be allocated to individual invoices until
either a remittance or confirmation email is received from the customer providing details of the
payment.
7.1.4 Where the payment details are not sufficient or a part payment is received, the customer
must be contacted for the allocation advice on the payment. If no response is received the
payment will be left open on account as an unallocated payment.

7.2 REFUNDS

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BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

7.2.1 If a customer account is in credit due to an overpayment a refund can be processed.

The customer will be required to provide their banking information to facilitate payment.

7.3 STATEMENTS AND DUNNING LETTERS

7.3.1 Accounts Receivable must generate and send statements to customers on a monthly basis.
7.3.2 Dunning letters relating to outstanding invoices will be sent by Accounts Receivable to
customers at 60 and 90 days. If collection has been unsuccessful for over 90 days, the
customer's account must be handed over to the legal department.

7.4 PROVISION FOR BAD DEBTS

7.4.1 On a monthly basis, account receivable must perform a review of aged accounts
receivables and establish a provision for balances that have been assessed as uncollectible.
7.4.2 A schedule of overdue accounts must be circulated to the General Managers and Cost
Controllers on a monthly basis. The operations team together with the account receivable
should follow up with the customers for payment on all outstanding balances over 60 days.
Records of follow up attempts should be maintained.
7.4.3 All customer accounts with balances over 90 days should be handed over to the legal
department if unsuccessful with all the follow up procedures.
7.4.4 Legal department must liaise with the customer regarding payment of the outstanding
balances. Failure to receive a positive response, a letter of demand should be issued to the
customer. Legal department may elect to use the services of the 3rd party collection agency to
aid in the pursuit of uncollectible balances.
7.4.5 Provision for bad debts must be calculated as follows:
Accounts receivable aged 180 days or greater must be provided for 50%; and
Accounts receivable aged 365 or greater days must be provided for in full 100%.
7.4.6 Provision for Bad Debts reconciliation must be performed by account receivable and
reviewed and approved by the Financial Manager on a monthly basis.
7.4.7 Provision for bad debts journal form must be prepared by accounts receivable and
approved by the Financial Manager.
7.4.8 The journal should be processed and saved by accounts receivable and posted by the
Financial Manager on the local ERP system.

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BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

7.4.9 The provision for bad debts must be reversed on the ERP system once the outstanding
amount has been recovered.
7.4.10 All the approved journals must be retained in the designated Google Drive.

7.5 BAD DEBTS WRITE OFF

7.5.1 Bad debts can be written off only when the collection efforts have proven unsuccessful
and further action is either not cost effective or the chances of recovery are highly unlikely.
7.5.2 The Accounts Receivable manager must identify all the customers that must be
recommended for write off.
7.5.3 The Accounts Receivable manager must write a memorandum on a /DCLM memo
template requesting write-off of customer account.
7.5.4 The memorandum must at least contain the
● Customer name;
● Customer amount to be write-off; and
● Reason for write off.
7.5.5 The memorandum should be accompanied by all the relevant supporting documentation.ie.
● Customer statement;
● Invoices;
● All correspondence demonstrating efforts to collect the outstanding balance.
7.5.6 The memorandum together with all the supporting documents must be submitted for
review and recommendation to the Financial Manager then for approval to the Head of Legal,
CFO and CEO.
7.5.7 Once the write off has been approved, a journal should be processed by Accounts
Receivable and posted by the Financial Manager on the local ERP system.
7.5.8 All Supporting documents should be maintained in the designated Google Drive.

7. RECORD CONTROL

Records Keeping – Retained documented information

All the relevant records must be retained in accordance with Record Retention Policy, in order to
demonstrate conformity to this work instruction.

Reason For
Title Retention Period Retention Location
Document

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BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

Customer statement 7 years Google drive Audit purpose

Age analysis 7 years Google drive Audit purpose

Provision for bad debts Journals 7 years Google drive Audit purpose

Bad debts written off 7 years Google drive Audit purpose

8. REVISION CONTROL

Revision No: Description of Change Changed By Date

0 New Procedure 22/05/2012

1 Layout update 17/02/2021

2 Procedure updated with the following: 07/04/2024

- Allocation of payment, refunds and
statements
- Long outstanding debtors
- Provision for bad debts
- Bad debts write
- Process flow

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 Procedure
BUSINESS MANAGEMENT SYSTEM No.
PROCEDURE FOR ACCOUNTS
RECEIVABLE Revision 2

Revision Date : 04.2024 Page 9 of 9 Rev. 2

THIS DOCUMENT IS UNCONTROLLED WHEN PRINTED