Office Administration & Processes: Debt Management

Debt ManagementDebt management policies are written guidelines, allowances, and restrictions that guide the debt issuance practices in the business including the issuance process, management of a debt portfolio, and adherence to various laws and regulations

A debt management policy should improve the quality of decisions, articulate policy goals, provide guidelines for the structure of debt issuance, and demonstrate a commitment to long-term capital and financial planning.   Debt management policies should be written with attention to the issuer’s specific needs and available financing options and are typically implemented through more specific operating procedures.

Five things to be included in the Debt Policy

1. Debt Limit

The Policy should consider setting specific limits or acceptable ranges for each type of debt. Limits generally are set for financial reasons.

2. Debt Structure and Repayment

Debt policies should also address debt structure and general repayment terms, including maximum repayment terms, debt service patterns (such as equal payments or equal principal amortization), and the use of variable or fixed-rate interest.

3. Debt Issuance Practices

Establishing clear and consistent debt issuance practices is critical.

4. Council Policy

Council will operate effective billing and debt collection processes including the efficient management of accounts receivable and related credit management. The granting of credit and recovery of debts outstanding must be controlled from the timely raising of invoices and subsequent monitoring and collection of debt. Council debt is to be managed in accordance with this policy and where applicable the defined management procedures.

5. Trading Terms

Unless otherwise provided by legislation, trading terms are not to exceed 30 days net from date of invoice/statement.

Office Administration & Processes

Payment Agreements

Payment Agreements must be duly noted and authorised by a delegated officer. Defaulted agreements will activate enforcement.

Provision of Credit

The provision of credit is not automatic and credit can be suspended or withdrawn based on compliance with trading terms. A Credit Application form may need to be completed in accordance with the Debt Management – Sundry Debtors procedure.

Provision for Doubtful Debts / Debt Write-off

Provision for Doubtful Debts Should be reviewed on an annual basis in accordance with Accounting Standards. Long Term Debt (>12 months) recommended to be written off will be decided in accordance with delegations.