The first two of the next four policies relate directly to the act of issuing an invoice or credit memo, while the third and fourth policies assist in adopt­ing consistent revenue recognition practices that are tied to billings. The adoption of these policies assists in enforcing various control systems de­scribed in this chapter. The policies follow.

1. All invoices must be issued within one day of shipment or completion of service delivery. This policy is designed to accelerate cash flow by avoiding billing delays. It also impacts the speed of the month-end closing, since billing is typically a significant bottleneck in the closing process.
2. Credit memos require prior supervisory approval. This policy prevents employees in the collections area from fraudulently intercepting cus­tomer payments and then offsetting the related invoices with credit memos.
3. The company shall not use bill and hold transactions. Though bill and hold transactions are allowable under clearly defined and closely re­stricted circumstances, they are subject to abuse and so generally should be avoided. If used, the form shown in Exhibit 1 can be used to doc­ument customer approval of the method.
4. A single revenue recognition method shall be used for all installment sales. This policy keeps an accounting department from switching back and forth between the installment method and cost recovery method for recognizing this type of revenue, which would otherwise allow it to manipulate reported levels of profitability.

Exhibit 1 Acknowledgment of Bill and Hold Transaction Form

[tags]billing policies, Hold Transaction Form[/tags]

Tags: billing policies, Hold Transaction Form