Accounts Receivable in an Uncertain Economy

1. Accounts Receivable in an Uncertain Economy Susan Wyatt Sedwick Associate Vice President for Research and Director Michael Martindale Sr. Contracts and Grants Specialist The University of Texas at Austin

2. Tracking Receivables at UT Austin • Roles • Office of Accounting • Sponsored Projects Award Administration • Office General Counsel • Vice President for Research • Deans

3. Billed Receivables at UT Austin

4. UT Austin – Monthly Billing Stats

5. UT Austin - Month End Receivables Balances

6. Steps to Avoid Potential Problems • Clear payment terms, invoicing requirements/instructions in agreement • Allow for electronic payment • Confirm deliverables prior to submission • Ensure proper format, include back-up, etc. • Invoice ASAP • Contact sponsor sooner rather than later when aware of non-payment

7. Monitoring Receivables • Tools to manage • Accounting system • Monthly, weekly reports • Aged reports • Dunning letters • Calendar/automatic reminder • Non-billed accounts • Strategies • Prioritize aged invoices • Identify accounts with multiple invoices and no payments • Focus on sponsors with payment history, potential problem accounts

8. Risk Areas • New sponsors • Sponsors with poor payment history • Small start-up companies • Large multi-nationals • Foreign sponsors • Pass-thru awards • State/local agencies • Department billed accounts • Awards with lump sum payments • due upon receipt of final report • Awards with short project periods

9. Reasons for Late Payment • Invoice lost • Payment lost • Invoice rejected • Improper invoice format • Lacks supporting documentation • Deliverable not received or not accepted • Timeliness of submission • Unallowable expenditures • Invoiced above authorized amount • Pass-thru funding not received • Sponsor cash-flow issues

10. Communicating AR Status • Routine/monthly reporting • Aged report • Non-payment issues – notify others • Management • OSP pre-award/contracting office • PI & department • Keys • Timeliness • Documentation • Keep everyone up-to-date

11. PI Involvement • Issues with the performance • Using PI leverage with technical contact • Intellectual property/reporting • Departing PIs • Escalating to chair/dean level when patterns emerge • Student Involvement • Withholding research results for non-payment

12. Dealing with Collections/Write-offs • Sponsored Projects Management • Payment plans • Senior Management • Collections • Pass-through funding • Write-off • Who absorbs the costs • IDC

13. It Starts with Pre-Award • Statement of Work • Payment terms • Remedies • Disputes • Intellectual Property • Sponsor risk assessment

14. Case Study #1 Professor Donowrong is a world-renowned expert in his field, so much so that his SOW is sometimes a simple sentence. He has great disdain for email and even telephone calls as he cannot be distracted by mundane administrivia. Three issues of non-payment by small businesses have arisen and all three are citing problems with performance and lack of response. What steps should be taken?

15. Case Study #2 In the course of processing monthly invoices, you notice that one of your accounts has been invoiced for several months, but only the first invoice has been paid. You contact the sponsor, who informs you that they are experiencing some cash flow issues, as they are waiting on a very large payment to come in for work they did for another client. Their project will be complete at the end of the month, at which time they will invoice for their work, the total of which is almost $1M. Their CFO requests that you give them a couple of months until the work is paid and they will fully reimburse you. What is your response?

16. Case Study #3 TyneeCo. contacts you recognizing they have fallen dreadfully behind in their payments to the university. Due to delays in awarding of the DoD prime agreement, they initiated the Sponsored Research Agreement with Big & Rich University with their own funds to support a graduate student. The DoD contract arrived with a restriction on the involvement of foreign nationals and the student (foreign) could not work on the DoD project. They have honored their commitment to the student and anticipate their cash situation will improve in the next 45 to 60 and are begging our patience. The student is depending on this work to support her dissertation, at least for the remaining 2.5 months of the semester. What are your next steps?

17. Case Study #4 After submitting the final invoice, which was due upon submission of the final deliverables, you follow up with the sponsor regarding payment on the project. The sponsor responds by informing the University that the deliverables provided are unacceptable and unusable by the sponsor. Because they did not receive an acceptable outcome, the sponsor will not submit any additional payment. You contact the PI, who disputes the contention that he did not fulfill his responsibilities. What course of action should you take?

18. Case Study #5 Half-way through a project with a new sponsor, you notice that they have fallen behind in paying invoices. After some difficulty in trying to reach the appropriate contact, you finally get a response. They request a monthly payment plan of $50K until they are current on all outstanding invoices. How do you respond?

19. QUESTIONS sedwick@austin.utexas.edu mamartindale@austin.utexas.edu