Example

In this example of how to calculate interest under the prompt payment law, the following assumptions apply:

• A state agency signs a contract with a vendor on Sept. 10, to purchase goods from the vendor.
• The goods are received on Sept. 24.
• The agency receives the vendor’s invoice on Oct. 6.
• The distribution date for the payment is Dec. 9.
• The amount of the agency’s payment is $500.00.
• The Comptroller’s office is responsible for issuing a warrant or initiating an electronic funds transfer to pay the principal amount owed by the agency.

Calculate Interest

1. Determine the due date for the payment by counting the 30 days beginning on the day after the agency receives the invoice. In the example above, the due date is Nov. 5.
2. Determine how many days the payment is late by counting days, staring on the day after the payment due date and ending the count on the payment’s distribution date. In the example above, the payment is late by 34 days.
3. Use the following formula to determine the amount of interest due:

   (# of days late ÷ 365) x (applicable prompt payment interest rate) x (amount of payment) = (interest due).