PART II - Preaudit Steps
L. Prompt Pay Interest Penalty (Ref. State Procurement Manual PRO-E-6)
- The UW System must pay interest on its invoices not paid or disputed within 30 days (earlier if required for a specific commodity by statute or contract) after receipt of a properly completed invoice or receipt and acceptance of the property or service (whichever is later).
- Interest must be computed and paid on invoices not paid within 30 days of receipt unless:
- Payment is from federal funds (14x).
- Another statute, law or contract language takes precedence.
- The vendor is another state agency.
- A timely notice of a good-faith dispute is sent to the vendor. "Timely" in this case means within 30 days, unless otherwise specified on an official purchase order or contract.
NOTE: Prompt pay good-faith dispute notices may be delivered by phone if the institution has a continuing working relationship with the vendor and the vendor agrees to this procedure. A record of the dispute should be attached to the vouchered transactions.
- A notice of an improperly completed invoice is sent to the vendor within 10 working days after receipt of the invoice.
- Determining when the prompt pay clock starts:
- For both invoices applicable to purchase orders and direct charge invoices (i.e. no purchase order), the prompt pay clock starts when the invoice is received in the office where the vendor has been instructed to send it. The invoice should be stamped with the date received. If the invoice is not date stamped, the clock starts at the invoice date.
- If the vendor sends an invoice to the wrong campus address, the vendor shall be notified of this improperly completed invoice within 10 working days of the date that the invoice was received on campus. The starting date for interest calculation would then be the date the notification was mailed. If the vendor is not notified within 10 working days, the starting date would be the date the invoice was received on campus.
- If an invoice is received for an unauthorized purchase, the clock will not start until the purchase has been authorized by the Purchasing Authority.
- When invoices are being accumulated to clear an outstanding credit memo, the vendor should be notified of it if the invoices are expected to be held for more than 30 days. The prompt pay time period would start when the accumulated invoices equal or exceed the credit memo. If the balance due the vendor is paid late, the interest penalty would be calculated only on the net balance due.
- If a vendor submits invoices after individual purchases and also submits a monthly statement, the "invoice received" date would be the date the invoices were received unless the vendor has given approval to use the date the statement was received. The vendor's approval to use the statement received date should be documented on the voucher.
- For leases, licensed software, subscriptions, maintenance agreements, etc., which cover a time period, such as a year, the goods or services received date is considered to be the beginning of the period unless the vendor has agreed to other terms.
- Subscription/Membership Renewals:
- For automatic subscription/membership renewals where the vendor continues to send new issues or continues membership privileges while awaiting payment, the prompt pay clock starts at the beginning of the renewal period.
- For conditional subscription/membership renewals where the subscription/membership is cancelled if payment is not received by the vendor by a certain date, prompt pay does not apply. Refer to State Procurement Manual PRO-E-6, VII.D
- Finance, interest and other late payment penalties noted on vendor's invoices which are not applicable to a contract law, or rule should be ignored. The interest penalties prescribed in Wis. Stats. 16.528, take precedence.
NOTE: Utility companies are authorized by the State Public Service Commission (PSC) to apply late payment charges if there is a clear indication on the bill of the amount of the late payment charge and the date after which it applies. They may charge either a monthly charge of no more than 1 1/2% per month compounded or a one time 3% charge. This charge cannot be applied sooner than 20 days after the bill was issued.
- Payment is considered complete on the date the check is issued.
- Prompt pay interest penalties under $5.00 per transaction may be disregarded unless the vendor requests payment. The vendor may make the request either specifically or generally and either before the potential occurrence or subsequent to its accrual.