Timely Vendor Payment
Vendors have a right to be paid in a timely manner for goods and services provided to the University. Departments play a major role in the payment process because payments will not be made until the department notifies the Accounts Payable Office that the item has been received in proper condition.
To give agencies added incentive and vendors restitution for untimely payment, New York State prompt payment legislation specifies that if a check is not issued to a vendor within 30 days from the date either the good or service or an appropriate invoice is received, interest will be paid to the vendor. The actual percentage applied is dependent on current interest rates. The legislation provides that late payment checks will be issued to vendors only if the total interest is $10 or more. Lesser interest charges are not assessed.
The legislation applies to payment for goods and services charged to the supply and expense or equipment category. It does not apply to payroll or payments made to certain State or State-related agencies. If there is a question as to whether interest should be applied to a particular transaction, contact the Accounts Payable Office ([email protected]).
The prompt payment guidelines dictate the circumstances under which the University will pay interest. Therefore, vendor policies specifying different rates or late payment fees do not apply to the University.
Interest payments will be charged directly to the respective account sub-object number 5799 thereby increasing the cost of the good or service to the department and University. Because payment of interest is an unnecessary expense, departments should ensure their receiving procedures are adequate to avoid incurring the charges.
Reasons for Not Paying Interest
The legislation provides certain circumstances that allow interest to be waived.
- Vendor did not fully meet purchase order terms.
- Items received were unacceptable to the University.
- Vendor not eligible for interest (other State agency, related agency).
- Invoice received from vendor inadequate for making timely payment.
1) Invoice information was incorrect or incomplete requiring follow-up or clarification.
2) The purchase order directs vendors to submit invoices to the Accounts Payable Office MSC 309. If the vendor sends the invoice to other than the Accounts Payable Office, the time period for interest accumulation does not begin until the invoice is received in the Accounts Payable Office. However, if the department directs the vendor to send the invoice to a location other than the Accounts Payable Office, the invoice is considered received when delivered to the place directed by the department.
Prompt payment legislation is very specific regarding vendor notification if there is reason to delay payment because of vendor nonperformance. To ensure such vendor notification is done in accordance with legislation requirements, it is suggested that all vendor notices of inadequate fulfillment of the purchase order be coordinated through the Accounts Payable Office. However, departments are allowed to have direct contact with vendors if they wish. When direct contact is made, the department should note the following:
1) Vendors must be notified that the good or service is not acceptable within fifteen days from the date the good or service is received by the University. This period includes the time used for the good to be transported to the department from the dock.
2) All vendor contacts should be documented with written correspondence. The Accounts Payable Office has developed a form letter (AP-101) for notifying vendors of the most common reasons for not paying an invoice. Telephone contact or verbal exchanges with vendors are not adequate to support an exception from interest payment requirements.
3) Reasons for not accepting the goods or services must be specific and state clearly the reasons why the item is not acceptable.
4) A copy of the correspondence should be forwarded to the Accounts Payable Office MSC 309 to ensure the office is aware of the dispute and to prevent a payment being issued by mistake.
Reversal of Interest Charges
Interest charges are assessed by the State Comptroller's Office based upon delivery and acceptance information provided by the University. Interest charges are listed as object number 5799 in the "SUB OBJ" column of the department's monthly accounting report. No separate notification of late charge assessments is sent to departments.
The Accounts Payable Office coordinates all University interest charge appeals. If a department believes a late charge is inappropriate, it should notify the Accounts Payable Office (518-437-3826) as soon as possible so action can be taken to reverse the assessment.
To overturn an interest assessment, it is necessary to identify the circumstances relating to the receipt and payment of the goods and services to document that the interest charge was not appropriate. Based on the information provided by the department, a decision will be made as to whether the appeal is justified. If there does not appear to be a reasonable basis for the appeal, the request will be returned to the department.
When departments use the Accounts Payable Office to notify vendors that items are not acceptable, the Accounts Payable Office will have all the information needed to resolve the interest matter. However, if the department deals directly with the vendor, the Accounts Payable Office will need copies of all vendor correspondence to document the situation and initiate an appeal.
The Accounts Payable Office will contact the vendor and/or the Office of the State Comptroller as appropriate. The results of the appeal will be reported to the department and, if appropriate, an adjustment made to the department's account.
If an interest charge is levied against an account due to an Accounts Payable Office error or because of circumstances outside the department's control, the above information should be provided to enable the Accounts Payable Office to withdraw the interest charge from the account.