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According to a Credit Today benchmarking survey on Unclaimed Property issues in credit, roughly 6 percent of companies out there have been audited and paid a fine for unclaimed property violations. Now, 6 percent may not seem that high, but do you want to take a chance?
If you go to a credit group with 50 Members, that means that, on average, three of you will have to go through a long and involved audit, and then write a big check to a state.
If you go to a credit group with 50 Members, that means that, on average, three of you will have to go through a long and involved audit, and then write a big check to a state for items that you presumably have declared as income, and also pay a hefty fine.
The best way to "innoculate" yourself against this is to have a solid policy in place and to follow it. Many credit execs we speak to tell us that when the auditors come knocking on their door to conduct an unclaimed property audit, if they simply show them their policy and explain how they follow it, that alone staves off the audit.
With that in mind, we've created a checklist of issues that your policy should address. Your situation will undoubtedly be unique, but this will give you a good starting point for what to consider:
| Unclaimed Property Policy Checklist | ||
| Use this as a starting point for your situation, which is likely to be unique. | ||
| PASS | FAIL | COMPONENT BEING CHECKED |
| How often do you review your receivables to look for potential unclaimed property? (ie, monthly, quarterly, annually?) | ||
| How old does a credit need to be to be examined as potential unclaimed property? | ||
| What are the specific categories that make a credit unclaimed property? | ||
| Who is responsible for researching a credit to make sure it's REALLY unclaimed property (and not a duplicate credit, for example). | ||
| What procedure(s) will you use to notify a customer about the credit? | ||
| Who is responsible for implementing that procedure? | ||
| How do you account for items identified as unclaimed property (since they should no longer be a part of A/R)? You may want to set up a general ledger account specifically for unclaimed property. These transactions will effect A/R, income, and A/P accounts, and possibly others, depending upon how you set things up. | ||
| If you can't find the customer, or determine that they're gone or out of business, where do you send the money? (ie, which state and what department?) | ||
| Who will be responsible for reconciling your unclaimed property account and how often will it be done? | ||
Obviously, this requires some resources on the part of someone at your company - probably someone in the A/R Department.
But in this case, we can assure you, ignoring this issue - or worse, systematically keeping the customers' money - will cost your company FAR more in the long run than devoting the necessary resources up front to keeping your firm fully compliant with these laws.
Definitely a case of an ounce of prevention is worth a pound of cure.
To download an actual policy template and other unclaimed property letters and templates, click here.
Checklist On Unclaimed Property Policy For Property Issues
Use our 9 point unclaimed property policy checklist to save yourself from paying the fines of unclaimed property issues. Follow the guidelines here and solve any property issue
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