Texas Prompt Payment Law
|Effective:||05/01/14||Approved By: Sr. Associate Vice President for Financial Affairs and Deputy CFO|
For Assistance Contact: Director, Disbursements & Travel Services
This guideline provides guidance for complying with Texas Government Code Chapter 2251 Prompt Payment Act and requirements for documenting and resolving disputed invoices.
- Texas Government Code Chapter 2251 Prompt Payment Act
- State of Texas — Comptroller of Public Accounts: Prompt Payment and Payment Scheduling resources
- University of Texas (UT) System UTS 166 — Cash Management and Cash Handling Policy
Table of Contents
A. 30-Day Payment Requirement
The Texas Government Code Chapter 2251 Prompt Payment Act stipulates that payment is due for goods or services 30 days from the date goods/services are received/completed, or a correct invoice is received, whichever is later. Invoice in the context of this prompt payment law means a vendor’s request or demand for payment. A statement that does not include a request or demand for payment is not an invoice. A payment is considered overdue beginning on the 31st day
Under the prompt payment law, a vendor
- Is a person who supplies goods and services to a governmental entity (including a state agency) or another person directed by the entity
- Includes an officer or employee of a state agency when acting in a private capacity to supply goods or services
- Does not include a state agency, except for Texas Correctional Industries.
Disbursements and Travel Services (DTS) receives email/mail daily and date stamps all invoices with the date received. If a department receives a vendor's invoice directly, the department must date stamp the invoice when received, and email it to DTS as soon as possible. It is important to date stamp the invoice when it is received, as payment is due 30 days from this date regardless of whether the invoice is received by DTS or another department.
A payment is considered to be mailed when postmarked or electronically transmitted. Because state agencies are required to schedule vendor payments so that the state receives the maximum benefit, UTSA schedules payments as close to the due date as possible within the 30-day requirement. If the 30th day is on a weekend or a UTSA or state holiday, UTSA adjusts the payment date so that the payment is postmarked or electronically transmitted within or before the 30-day requirement.
Although UTSA generally does not process payments to vendors before they are due, payments may be processed earlier than the standard 30 days when
- An early payment discount is available per the purchase order terms or as stated on the invoice;
- A contract requires prepayment before goods or services are received;
- A subscription requires prepayment;
- An earlier payment date is required for a sponsored project; or
- The early payment is required to comply with accounting principles at fiscal year-end.
Any other exceptions must show benefit to UTSA and be pre-approved in writing by the director of DTS, the assistant vice president for Supply Chain or the senior associate vice president for Financial Affairs and deputy chief financial officer (SAVPFA).
B. Interest Calculation
Interest is due to a vendor when the payment is overdue according to the prompt payment law (the 31st day), except when
- There is a bona fide dispute with the vendor;
- The invoice was not mailed or sent to the address that appears on a UTSA purchase order;
- The terms of a federal grant, contract, regulation or statute prevent UTSA from making a timely payment with federal funds; or
- The invoice is for payment to another Texas state agency (except for Texas Correctional Industries).
Interest for an overdue payment is calculated in accordance with the prompt payment law using guidance provided on the Texas State Comptroller of Public Accounts’ website. The comptroller determines the late payment interest rate on an annual basis (the interest rate for late payments to vendors is the rate in effect on September 1 of the fiscal year in which the payment becomes overdue; the rate is one percentage point higher than the prime rate published in the Wall Street Journal on the first business day of July). That rate is updated in UTSA’s financial accounting system, and interest is automatically calculated when applicable.
Interest accrual begins on the date the payment becomes overdue, and stops accruing on the date the payment is postmarked or electronically transmitted. The interest must be paid at the same time the principal is paid.
Interest is not accrued or paid if the amount is less than or equal to $5.
Interest does not accrue while vendors are on hold. Refer to the Payment Holds financial guideline to resolve holds.
C. Disputed Shipments or Invoices
If there is a dispute with an invoice or shipment, UTSA must notify the vendor by email or telephone within 21 days of receipt of the invoice. That notification must include a detailed statement of the disputed amount. UTSA may not withhold more than 110% of the disputed amount from payment.
The disputing department and/or DTS are required to document all relevant information on a Vendor Dispute form. The form requires
- Nature/reason for the dispute;
- Date(s) of the dispute;
- Details of communication with the vendor regarding the dispute, including phone numbers and contact names; and
- Dispute resolution and in whose favor it was resolved.
If part of the invoice is disputed, the Vendor Dispute form should indicate the disputed amount.
If the dispute is resolved in UTSA’s favor, the vendor must submit a corrected invoice.
If the dispute is resolved in the vendor’s favor, the overdue payment is eligible for interest, which is calculated from the original due date.
NOTE: When the department is responsible for disputing the invoice or shipment, the department must send the completed forms and related payment documentation to DTS.
|05/16/22||Updates to disputed invoice processes per legislative changes (Texas Government Code Section 2251.042). Clarified subscriptions requiring prepayment and that interest does not accrue while a vendor is on hold. Removed section D and linked to the Payment Holds guideline.|
|06/19/20||DTS now receives mail daily, and departments are to email invoices to DTS (section A). Hyperlinks, position titles and other editorial updates throughout.|
|06/18/19||Update to Vendor Hold Procedures|