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Prompt Payment FAQ

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Why is interest automatically charged to some payments?

Chapter 2251, Government Code (the Prompt Payment Law) makes a state university liable for interest accruing on any overdue payment. The Comptroller’s Office is required to automatically pay that interest at the same time the principal is paid.

What payments are exempt from prompt pay interest?

The following are some examples of exempt payments:

  • Employee reimbursements
  • Tuition refunds
  • Utility vendors
  • Pass-through expenditures
  • Payments to other State of Texas agencies or higher education institutions
  • Advance payments, such as subscriptions, leases, etc.
  • Payments for any goods or service where an invoice was not provided or required.

How will interest be calculated?

If a payment is subject to interest, it will be calculated as follows:

  • State Funds: The Comptroller's Office will calculate interest charges based upon the Payment Due Date calculated and submitted through SAP.
  • Local Funds:  SAP will calculate interest charges based upon the Payment Due Date derived from the invoice received date and service date.

Which account will the interest be charged?

A default university account will be assessed the interest expenses when the principal is paid.  A quarterly interest payment report will be routed to executive management for review.

How will Accounts Payable determine the Invoice Received Date?

The invoice received date will depend on where the invoice was received:

Received By: Invoice Received Date:
Accts Payable P.O. Box 747 Accts Payable date stamp
Accts Payable 601 University Drive Accts Payable date stamp
Department other than Accts Payable Department stamp date
Department and no date stamp Vendor's invoice date

 

How is the Service Date determined?

For goods, the goods receipt date in SAP.   For services, the final date the services were completed.

What if the equipment I purchased requires installation, inspection or testing before acceptance?

The service date is the date when installation, inspection or testing is completed and the equipment is found to meet specifications.  The purchase order must clearly state that an installation, inspection or testing is required and any timeframe requirements (i.e. 30 day testing period.)  Otherwise, the day the equipment was received will be the service date.

Can interest be refused when paying the principal?

If you request that interest be refused from calculating, you must clearly document all the facts to substantiate your request. We cannot refuse interest if you do not provide adequate documentation, unless it is an already exempt purchase.

Can a vendor waive the rights to automated prompt payment interest?

No, the vendor cannot waive their rights.  The vendor may return the interest to Texas State.  Mail checks to the Accounts Payable Office for deposit against the interest expense.

Can a payment be made earlier than the 30 days (early payments)?

Payments should be scheduled to be paid as close to the 30-day limit as possible.  Early payments may be made if a discount is available or if there is a contractual agreement to pay sooner.