Prepayment
A prepayment may be requested when a deposit or advance funds are necessary to pay a vendor before goods are delivered or agreed services are rendered. Usually, prepayment is a condition or part of the payment terms referenced on the signed contract or purchase order (PO). Under Texas rules, agencies generally may not pay for goods or services before delivery unless the advance payment is necessary and serves a proper public purpose.
Business Process
PO and Contract-Based Prepayments
A separate prepayment approval is not required when:
- The payment is tied to an executed PO or contract
- The prepayment terms are clearly documented in the PO or contract
In these cases, payment may be processed based on the approved business terms already established in the PO or contract. Departments should ensure the invoice matches the approved terms and that required supporting documentation is included with the payment request.
Non-PO and Exception-Based Prepayments
A separate prepayment approval is required when:
- The payment is submitted on a non-PO voucher, and no formal agreement is in place
- The PO or contract does not clearly document the prepayment terms
- The request is an exception outside standard approved terms.
In these cases, prior approval from the assistant vice president of Supply Chain or the director of Disbursements & Travel Services must be obtained before payment is processed.
When Prepayment May Be Appropriate
Advance payment may be appropriate only when it is necessary, serves a proper public purpose, and is supported by adequate documentation. Examples include significant cost savings, certain maintenance contracts, subscriptions, specialized or proprietary goods or services that require advance payment, and certain disaster-related purchases.
If a prepayment is requested by the vendor, you, as the department sponsor, are responsible for ensuring the goods are delivered in their entirety or that services are rendered to your satisfaction. If this is not the case, it is your responsibility to follow up with the vendor to pursue a credit, refund or recovery of the funds. Complete the Vendor Dispute form to record and track vendor follow-up efforts.
For PO-related prepayments, departments must complete receiving in Rowdy Exchange when applicable so payment can be processed without unnecessary delay. Departments must also provide a copy of the executed PO or contract showing the approved prepayment terms when submitting the invoice for payment. Disbursements & Travel Services does not review POs in Rowdy Exchange and cannot identify payment as prepayment unless the executed document is included with the request.
For non-PO payments, departments must attach the required supporting documentation and approvals to the voucher submission, including any agreement or documentation supporting the prepayment terms.
Departments are responsible for:
- Providing the executed PO, contract or other supporting documentation showing the approved prepayment terms
- Ensuring that invoice amounts align with the approved terms
- Completing receiving PO transactions when applicable
- Verifying that goods or services are received as expected
- Following up with the vendor when goods or services are not delivered as agreed
