Money Collection on Behalf of Third Entity Policy

Purpose

• Mitigate the risk of financial loss, fraud, and legal disputes.
• Ensure transparency and accountability in handling third-party funds.

Scope

Applies to all departments and personnel who may collect payments intended for a third party (e.g., cashiers, sales representatives).

Roles & Responsibilities

• Management
  • Implement and maintain this policy.
  • Clearly define authorized collection methods for each third-party relationship.
  • Establish clear communication channels between the organization, the third party, and the payer.
  • Conduct periodic reviews to ensure adherence to the policy.
• Staff handling collections
  • Comply with all aspects of this policy.
  • Obtain written authorization agreements from the third party outlining collection terms (fees, timelines, etc.).
  • Clearly identify collected funds as belonging to the third party and segregate them from your organization's funds.
  • Issue detailed receipts to the payer specifying the collected amount and purpose.
  • Maintain accurate records of all third-party collections.

Policy Statements

Collection Methods

• Authorized collection methods should be clearly defined for each third-party relationship (e.g., dedicated accounts, separate deposit slips).
• Cash collections for third parties should be minimized whenever possible.

Authorization Agreements

• A written agreement with the third party must be obtained before accepting any collections on their behalf.
• The agreement should clearly outline:
  • Authorized collection methods.
  • Fees associated with the collection service (if applicable).
  • Timeframes for remittance of collected funds to the third party.
  • Dispute resolution procedures.

Segregation of Funds

• Collected funds belonging to the third party must be clearly identified and segregated from the organization's funds.
• This can be achieved through dedicated bank accounts, separate cash drawers, or clear labeling.
• Depending on the nature of the third-party relationship and the volume of collections, additional controls may be necessary.
• This could involve implementing escrow accounts or utilizing third-party payment processors.

Receipts

• Detailed receipts must be issued to the payer for every collection, specifying:
  • Date of transaction.
  • Amount collected.
  • Name of the third party the payment is intended for.
  • Contact information for both the organization and the third party.

Record Keeping

• Maintain accurate and detailed records of all third-party collections, including:
  • Date of collection.
  • Amount collected.
  • Payment method.
  • Name of the payer.
  • Reference number or invoice details (if applicable).
  • Date of remittance to the third party.

Exceptions

Exceptions to this policy must be pre-approved by the Finance Department in writing and only in exceptional circumstances. Clear documentation outlining the justification and approval process must be maintained.

Reporting

• Any discrepancies or suspicious activity related to third-party collections must be reported to a supervisor immediately.

Compliance

• Failure to comply with this policy may result in disciplinary action.