OFFICE: State Accounting Office / STATE: GA / DATE: 03/03/2015
QUESTION / ISSUE:
Georgia continually is looking to make improvements to business processes within the state. In order to help in that effort, we would like to receive feedback from states relative to the following accounts payable questions:
Payment Method
Does your state define when payment methods such as p-cards, ghost cards, ACH, checks, and wires are to be used? If so, what are the criteria?
Payment Terms
Does your state have standard default payment terms? If so, what are they?
Note: We realize there may be exceptions to these terms and are not asking for the exceptions at this point…just the terms your state would prefer.
Has your state considered extending payment terms? If so, what would be the new standard?
Payment Clock
When do you start the clock to determine due date?
When invoice received? When goods received? The later of both?
Payment Discounts
Does your state negotiate prompt payment discounts?
If so, what are the typical terms and how often negotiated?
State / Comments
Arkansas / Payment Method
Yes. The state has a procurement guide that outlines the preferred payment methods for different transactions (attached).
Payment Terms
No. The Arkansas Financial Management Guide, R1-19-4-1210, states that payments will be made based on the vendor’s due date and payment terms.
Payment Clock
See answer to previous question.
Payment Discounts
No
Iowa / Payment Method
No, the state has been encouraging departments to work with their vendors to become ACH users and the state also has been encouraging the use of P-cards.
Payment Terms
Net 60. The state has not considered extending payment terms.
Payment Clock
The state has 60 days to pay for goods and services following the receipt of the claim. After 60 days, the state must pay interest at the rate of one percent per month on the unpaid amount.
Payment Discounts
Departments may enter into contracts for goods or services on payment terms of less than sixty days if the state may obtain a financial benefit or incentive which would not otherwise be available from the vendor. The terms are normally from the vendor and therefore vary by contract or vendor.
Maryland / Payment Method
Maryland defines payment methods for P-cards, ACHs, checks and wires.
P-card - Any payment less than $5,000 where the vendor accepts VISA.
ACH - Any vendor can participate in the ACH program. ACH is the preferred method for payments.
Check - Vendors who do not participate in either of the above.
Wire - State agencies make the determination of when to use wire, not the preferred method for most payments.
Payment Terms
Maryland pays with 30 days.
Payment Clock
Maryland pays the later of both.
Payment Discounts
This is up to each individual state agency.
Minnesota / Payment Method
Minnesota’s purchase card program permits authorized users to purchase allowable goods and services to promote efficiency and cost effectiveness in conducting the state’s business. Certain items are prohibited on a purchase card; examples include: explosives, alcohol, capital assets, professional/technical services, etc. There is a maximum transaction limit of $5,000, additional rules apply for sensitive items.
Minnesota sends out a monthly mailing to vendors who receive more than two payments in three months encouraging them to sign up for direct deposit. Wires are limited to those cases where direct deposit is not an option, closing payments on land purchases is a good example. We also use a pre-paid debit card for travel expenses incurred by the state’s tourism director. We are not currently using ghost cards.
Payment Terms
Minnesota has a law that requires state agencies to pay valid invoices within 30 days. If a discount period applies, agencies should take advantage the discount and make payments within the specified period.
No.
Payment Clock
Our prompt pay law uses the later of the invoice received date or the goods/services received plus 30 days.
Payment Discounts
Payment discounts are negotiated on the state’s purchase cards. Typically contracts are negotiated for a 5-year period with payment terms of 30 days, but exceptions may apply.
Nebraska / Payment Method
Nebraska has incorporated ACH enrollment data into the substitute Form W-9 and request that information when setting up new vendors. ACH is the preferred method of payment. Warrants will be issued if the vendor does not provide banking information. The state policy is that all payments over $25,000 are to be made via ACH, unless a specific exception is approved on a case-by-case basis. We use P-cards only for small transactions like supplies etc.
Payment Terms
Our system uses net 30 as standard terms. There is statutory language which sets the terms at 45 days for most payments and 60 for certain types of payments. Payments would be delinquent after these dates and interest would be allowed.
Payment Clock
The later of goods received or invoice received.
Payment Discounts
Not directly.
North Carolina / Payment Method
North Carolina does not define when P-cards or ghost cards can be used, but the state does set a transaction dollar limit for each agency, effectively limiting the way the cards are used. The state would like to pay as many vendors as possible via ACH, and vendors are encouraged to enroll in the ACH method, but there is no law mandating this payment method. As a result, we pay a lot of dollars through ACH, but many of our smaller vendors choose to receive checks.
Payment Terms
The default standard payment terms in North Carolina are “Net 30.” In lieu of any negotiated terms, the state will pay all invoices Net 30. To my knowledge, the state is not contemplating extended payment terms.
Payment Clock
The due date for a payment is determined by the payment terms, based upon the vendor’s invoice date.
Payment Discounts
Some vendors offer prompt payment discounts, and some agency buyers negotiate prompt payment discounts. It is hard to come up with typical terms, because discount terms change with the cost of money (interest rates). With interest rates as low as they are now, almost any discount pays better than waiting the full thirty days.
Ohio / Payment Method
P-cards are used for non-PO transactions only; EFT payments are preferred although a good portion of tax refunds and public assistance payments are by check. Wires are not used.
Payment Terms
As part of our upgrade to PeopleSoft 9.2 we are trying to have a standard payment terms through eSupplier registration. We plan to use 2/10 net 30 unless they are federal payments or electronic payments (EDI or XML) which will by pay now (with 2% discount if paid in 10 days).
Payment Clock
The clock starts when goods are received and we receive a valid invoice.
Payment Discounts
Currently our procurement group has many different pay terms which are generally not achieved. We want to simplify to just a few options on the payment side after our 9.2 upgrade in July.
Oregon / Payment Method
Payment methods vary between state agencies. Our preference is to utilize the payment methods that requires the least amount of overhead, which is in the following order, as applicable:
- P-card
- ACH
- Checks (This process is same with ACH pending on the vendor being set up for automatic deposit)
- Ghost Cards are used to make travel arrangement for state of Oregon but will be paid via check writing process which the vendor could have set up as ACH.
- Wires are only used for specified purpose because it usually involves a wire transfer fee. (For example, this is used for land purchases since they go through escrow.)
The state policy is that the state pays overdue account charges incurred by state agencies that do not promptly pay for goods and services provided by private businesses. Claims are considered "overdue" if a check or warrant is 45 days from the date the agency received the invoice, or the date of the initial billing statement if no invoice is received, or the date the claim is certain by agreement of the parties or by operation of law. Overdue account charges will not exceed 8-percent per annum and are to be paid against an agency's appropriation or limitation.
With that being said, the practice at the central administrative agency is to pay as soon as possible due to volume. In addition, interest rates are at an all-time low so there is no incentive to hold onto our cash and try to time our invoices to get that interest perfectly.
We are not aware of any potential new payment terms.
Payment Clock
Our payment clock doesn’t start until there is evidence of the following, in accordance with state policy:
- Goods or services have been received;
- Items delivered were as specified;
- Prices, terms, and extensions shown on the vendor’s invoices are correct. Agencies should pay vouchers by the due dates to take advantage of maximum discounts.
There are certain circumstances that we do come across vendors providing discounts for prompt payments. This practice is rare due to the state’s preference of paying with a P-card.
Rhode Island / Payment Method
Purchase and ghost cards are only used for small dollar purchases (no services), advertising and travel. ACH, check or wire are determined by supplier choice (except for payments over $1M where we encourage ACH).
Payment Terms
Net 30
Note: We realize there may be exceptions to these terms and are not asking for the exceptions at this point...just the terms your state would prefer.
We are currently working on programming to allow for discounted terms If so, what would be the new standard? Standard would remain Net 30 but discounted terms would be allowed.
Payment Clock
Invoice date or date goods/services received, whichever is later.
Payment Discounts
Not currently negotiated - hope to do so in the future.
Vermont / Payment Method
In general the state of Vermont does not require a particular payment method. We do encourage payment by ACH, but it is not required. Payment method may be negotiated as part of a contract.
Payment Terms
Yes. Default payments terms are NET30.
Payment Clock
The due date is based on the vendor’s invoice date – so with NET30, due date is 30 days from invoice date.
Payment Discounts
Prompt payment discounts may be negotiated as part of a contract.
Wyoming / Payment Method
No
Payment Terms
45 days per statute.
Payment Clock
The later of both.
Payment Discounts
No