Prompt Payment, Invoices, and Vouchers

Applicable or Related Code Sections

• ORC Section 126.30 - Interest on late payments for goods and services

• ORC 125.01(B) - Definition of invoice

• ORC 131.34 - Transfers between funds or between state agencies

Related Links

• Late Payment Calculator
• Model Contract for State Agencies
• State of Ohio Standard Terms and Conditions
• DAS Purchasing Goods and Services Policy (PM-01)

I. Purpose

This policy sets forth a state agency’s responsibility to ensure prompt payment, a receipt of proper invoice, including the contents of a proper invoice, and the payment of interest if an agency fails to make a prompt payment.

II. Scope

The terms of this policy apply to each organized body, office, and agency established by the laws of the state for the exercise of any function of state government.

III. Definitions

• “Payee”: Any organization or individual who has registered with the state of Ohio so that funds can be received from the state. This entity is otherwise referred to as a supplier and was formerly known as a vendor.
• “Prompt Payment”: Payment received by the payee by the date on which payment is due under the terms of a written agreement between the state agency and the payee, or if a specific date is not established by a written agreement, thirty (30) days after the state agency receives a proper invoice for the amount due.
• “Proper Invoice”: An invoice containing the requisite information set forth in this policy.

IV. Provisions

1. Prompt Payment

   1. A state agency is responsible for ensuring prompt payment is made to its payees. An agency’s responsibility to make a prompt payment begins when the agency receives (1) the goods or services free of defect, and (2) a proper invoice.
   2. Agencies and payees may stipulate the date at which payment is due in a written agreement. In the absence of a written agreement or agreed-upon date in a written agreement, a payment is due thirty (30) days after the receipt of a proper invoice.
   3. If the invoice is not proper, a state agency must inform the payee in writing within fifteen (15) days of receipt of the invoice, and provide information as to why the invoice cannot be paid. After proper notification is provided to the payee, payment will not be due until thirty (30) days after the state agency receives a proper invoice.
   4. A state agency is responsible for paying interest to a payee if:
      1. It receives an improper invoice and fails to notify a payee within fifteen (15) days; or
      2. It receives a proper invoice and fails to make payment promptly.

2. Proper Invoices

   1. A proper invoice must contain the following information:   

      1. The information set forth in Ohio Revised Code, section 125.01 (B) or Section 126.30, if applicable; and

      2. Information that allows the agency to validate the invoice, which may include but is not limited to:

         1. Purchase order number(s)

         2. Contract number  

         3. Agency name

         4. Agency billing address

         5. Delivery location of goods or services  

         6. Payee name  

         7. Payee payment remittance address

         8. The date that services were provided or that items were shipped.

         9. A unique invoice number.

   2. A state agency can add information that will enhance accurate processing but must add a unique invoice number if none is provided by the payee. OAKS FIN will not save a voucher if it contains the same invoice number within the same business unit. The use of a unique invoice number will prevent duplicate payments.
   3. An agency should redact any confidential or personal identifying information a payee provides on an invoice prior to entering the invoice in OAKS FIN, including individuals’ names or truncated personal identification numbers, when appropriate.
   4. The date the state agency receives the proper invoice must be entered in the "Invoice Received" date field in OAKS FIN. The "Invoice Date" field can be used to enter the date shown on the payee’s invoice.
   5. In some State Term Contracts, the Department of Administrative Services (DAS) may negotiate a discount. DAS's general terms and conditions for discounts require the discount period be calculated from the date the state receives a proper invoice. OAKS FIN automatically calculates the discount based on the pay terms and the invoice date entered on the voucher. If a discount is available, OAKS FIN deducts the discount amount from the amount paid to the payee. When the payment references a purchase order, the purchase order will be reduced by the full amount of the invoice but the agency’s available balance for the appropriation will be reduced only by the amount of the payment.
3. Unique Invoice Number, State of Ohio Invoice Number Standards

A state agency must ensure that each invoice entered for payment has a unique, non-duplicative number to prevent duplicate payments. DAS's State of Ohio Standard Terms and Conditions and the Model Contract for State Agencies include the unique invoice requirement.

Exhibit A of this policy contains the State of Ohio Invoice Number Standards. Agencies should always follow these Standards, but especially when: (1) an invoice is received without a number, (2) an invoice is received with a number that cannot be distinguished from another invoice number, or (3) when an invoice is repetitive or common (i.e., is not unique).

4. Interest Calculation and Payments
   1. If a state agency does not make the payment by the required payment date, the agency must calculate the interest in accordance with Revised Code Section 126.30. The calculated interest must be paid to the payee if the amount is greater than or equal to ten dollars. The amount due to a payee may be calculated by using the Late Payment Calculator. If interest is owed for a period covering portions of more than one calendar year, calculate the interest owed for the appropriate part of each year at the rate for that year.

   2. Utilities regulated by Public Utility Commission (PUCO) may bill late payment charges based on the rates approved by PUCO. If a late payment to a utility causes the agency to lose a discount or pay an interest/late payment penalty, the additional cost must be coded to account 525054.

   3. Interest payments must be coded as 529068.

   4. Agencies are only authorized to pay interest in accordance with this policy. No agency is authorized to pay late payment or interest fees charged by payees other than fees charged by regulated utilities and Unemployment Compensation payments. Annually, the Office of Budget and Management (“OBM”) will request agencies justify any large, unusual, or frequent interest paid to payees.

   5. Payments made from state agency to state agency must be made within thirty (30) days, however no interest is due for late payments between state agencies. If a state agency fails to make the requisite payment, the state agency receiving the payment may contact OBM to request assistance in collecting the payment.

5. Invoice Prohibitions

   1. Other than as provided in this policy, a state agency shall not remove information from payee invoices except for sales tax, excise tax, erroneous freight charges, past due balances, or contract penalties.

   2. Payee invoices shall not be combined within a voucher in OAKS FIN. Each invoice must be entered independently and have its own corresponding voucher number.

   3. A state agency shall not voucher a summarized invoice or statement that has charges from other independent invoices that have been previously received.

   4. After a voucher is entered and saved in OAKS, the pay terms cannot be changed. A state agency may contact OBM.Helpdesk@obm.ohio.gov to request a change to the voucher's payment date. The agency requesting the change must also provide the justification for the request, including an explanation if the request is made on behalf of a payee.

EXHIBIT A