E-11-1 Penalty for Late Payments to Vendors

I. Purpose

To establish University policy for late penalty payments as required by KRS 45.451 to KRS 45.458.

II. Policy

KRS 45.451 to KRS 45.458, enacted by the 1984 General Assembly, states that effective January 1, 1985, the University of Kentucky is required to pay all invoices within thirty (30) working days of the receipt of a satisfactory vendor’s invoice and satisfactory delivery of goods and services. Per KRS 45.454, failure to pay obligations as required will result in a penalty of one percent of the amount due for each full or part month that the payment exceeds thirty (30) days. 

1. When a one percent penalty is included on a vendor’s invoice and submitted by a unit for payment to the vendor, it will be charged as an operating expense to the responsible organizational unit. If the department determines that the vendor has not delivered the goods/services as ordered or that the billing is not correct, the vendor should be notified in writing so that the thirty (30) day payment period and associated penalty will not apply.
2. The thirty (30) working days period begins on the day the good or services are received. For partial shipments, the thirty (30) day period would begin on the day the last shipment is received. If the goods or services have been received but the vendor’s invoice has not been received, then the thirty (30) day period will begin when the vendor’s invoice is received.

III. Responsibilities 

1. Department Personnel
   1. Document date goods and services were received;
   2. Notify vendor in writing of any improper performance which would negate the need to pay the penalty;
   3. Forward any invoices received by the department in a timely basis to Accounts Payable Services or process Payment Request Document (PRD) in a timely basis; or
   4. Include the one percent penalty on PRD’s initiated by the department beyond the 30-day working day period or add a line to the related Purchase Orders reflecting the invoice number for the late payment penalty.
2. Accounts Payable Services
   1. Process payment documents on timely basis;
   2. Include late penalty payment on documents authorized by department; and
   3. Investigate inquiries of late payments by vendors.

IV. Procedures

1. Document the date good and services were received by
   1. Entering the goods receipt for the SRM shopping cart/SAP Purchase Order timely; or
   2. Maintain copies of delivery notices and packing slips demonstrating date of receipt. 
2. Notify vendor in writing of any improper performance issues. Examples include
   1. Incorrect billing
   2. Damaged goods
   3. Wrong type of goods received
   4. Contracted services incomplete or
   5. Inoperable or malfunctioning materials or equipment.
3. Notify Accounts Payable Services of authorization for late penalty on Purchase Orders when appropriate by including the late payment penalty on the PRD or by adding an extra line to the PO for the late invoice.