Example

This is an example of how to calculate interest under the prompt payment law. In this example, 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.

1. Determine the due date for the payment. Start counting the 30 days beginning on the day after the agency receives the invoice. In this example, the due date is Nov. 5.
2. Next, determine how many days the payment is late. Start counting on the day after the due date and end counting on the payment’s distribution date. In this example, the payment is late by 34 days.
3. Now 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).