Policy 3260: Prompt Payment Policy

1.0 Purpose

2.0 Policy

1. The Prompt Payment Act requires that payment be remitted to vendors within 30 days of:
   1. the receipt of the vendor's invoice, or

   2. the receipt of the purchased goods or services, whichever is later.

2. Most payments to outside vendors are covered by the Act. However, some vendor payments (such as subscriptions, honorariums, memberships, and postal supplies) are not covered by the Act. Departments should allow 10 working days (two weeks) before the due date for the Controller's Office to process transactions.

   • For vendor payments made by check, the postmark date shall be deemed the payment date.

   • For vendor payments made using Financial EDI, the bank settlement date is deemed the payment date. That is the date the funds are deposited in the vendor's bank account and are available for their use. EDI payments that have weekend or holiday due dates are paid on the last business day prior to that weekend or holiday.

3. Sometimes disputes occur concerning the purchase of goods and services. When a dispute occurs, the 30-day time period does not start until the dispute is resolved. Thus, it is very important that the due date inserted on the invoice form reflects the dispute settlement date plus 30 days.

   The disputes can be either: a) a disagreement concerning the quality or appropriateness of the received goods or services, or b) damaged or inoperative goods. When a dispute occurs, the actions should be documented on the voucher for audit review.

4. When an error occurs on a vendor invoice, prompt pay due date computations should be made from the date the invoice is satisfactorily corrected.

5. A "confirming purchase" slows down the payment process because that type of purchase processes through the Purchasing Department before it arrives in the Controller's Office. Use "confirming orders" only in emergency cases and in cases authorized by the Purchasing Department.

6. The state Corporation Commission (SCC) rules for utility payments supersede the prompt payment guidelines. The SCC rules require payment of utility invoices within 20 days from the date the invoice is prepared. This rule conflicts with the prompt pay rule for making payments 30 days after the receipt of the invoice. In some cases, the SCC rule reduces the time available for making payment by as many as 18 days. If payments are not received by the due dates, the utility company automatically adds the late charges to the account.

   When paying a utility invoice, prepare the accounting voucher immediately upon receipt of the invoice. When entering the due date, allow 4 days from the due date.

   Enter the account number in the invoice number field.

   Send to the Controller's Office.

7. Registration Prepayments - The due dates for prepayments at conference or meeting registrations should be dated at least four (4) days prior to the date the registration is due. The check will be written and mailed on the date entered on the accounting voucher.

8. Our policy prohibits the payment of late charges, which when calculated according to state guidelines, total less than $1.00.

3.0 Procedures

The following procedures should be performed for each purchase and payment.

1. Sign the receiving report AND record the date of receipt of the goods or services.

2. Date stamp the vendor's invoice on the day it is received.

3. Add 30 days to the later date of the two dates above and insert that date on the accounting voucher. For SPOs, insert the payment due date directly on the payment copy of the SPO.

4. If the vendor's invoice is not stamped when received, it can generally be assumed that the invoice was received about three or four days after the date of the invoice.

5. If the payment terms are NOT 30 days, use the alternative terms in computing the due date to insert on the state invoice. Be sure to document why the due date is different from the standard 30 days.

6. Process invoices for payment on a daily basis. Adopt a policy of processing all payments as soon a received. This is the key part of compliance with prompt pay.

7. When received merchandise is not placed in service or checked immediately upon receipt, the proper receiving date to use for prompt pay purposes is still the date the goods are received. The best position is to check merchandise immediately on receipt.

   Alternatively, arrange for delayed payment terms with the vendor when immediate check-out of the merchandise is not possible. The Purchasing Department has agreed to provide standard wording for purchases that need delayed payment terms.

8. When reviewing and signing invoices for payment, a department head should review the payment due date for reasonableness.

9. If an invoice for interest charges for a late payment is received, contact the Controller's Office concerning processing procedures. The interest charges will be reviewed to determine if they are appropriate before making a payment. Late charges are charged to the account that originally paid for the goods or services.

4.0 Definitions

5.0 References

1. Code of Virginia, Sections 11-62.1 through 11-62.9

2. "Prompt Payment Act" memorandum issued by the Office of the Comptroller, June 27, 1984

6.0 Approval and Revisions

• Revision 0

  Approved March 3, 1989 by the Manager of Accounting Services, Larry D. Lawrence.

  Reviewed March 20, 1990. No changes.

• Revision 1

  Entire document reviewed and revised by the Controller's Office.

  Approved October 30, 1995, by Manager of Accounting Services, Larry D. Lawrence.

• Revision 2

  Policy renumbered to 3260 from 3200 to avoid numbering conflict.

Virginia Tech Policies
Last update: 02/02/1999

URL: http://purl.vt.edu/vtdocs/policies/3260