Prompt Payment Act: Definitions 

The following list defines concepts that are important to Prompt Payment Act processing in the SAP System:

·        Acceptance period: In most business, when goods are received, there is a period between the receipt and their actually being accepted into stock. This is called the acceptance period.

When creating a purchase order with the EnjoySAP transaction ME21n, you can stipulate an acceptance period. The acceptance date must not be later than the goods received date plus the acceptance period.

·        Applicable interest rate: The interest rate established by the Bureau of Public Debt for interest payments. It takes effect the day after the due date, except where the interest penalty is prescribed by other governmental authority.

·        Days late: The number of days late for purposes of calculating Prompt Payment Act interest penalties. Days late is the Treasury payment date less the PPA Due Date (see below), in calendar days. Days late cannot exceed 365.

·        Economically justified: This termis used in reference to the payment of an invoice. A federal agency has the option of paying early and taking discounts, or paying as close to the due date as possible and not taking any discounts. The more profitable option is “economically justified”.

·        Effective due date: The date on or before which a payment should be processed by the agency under the Prompt Payment Act. It is calculated by adjusting backward from the PPA due date, in business days, the treasury processing days (negative grace days) (see below).

·        Invoice date: The date printed on the invoice by the vendor.

·        Invoice receipt date: Date the invoice was received by the agency’s paying office. If the agency does not date stamp its invoices, the invoice receipt date is the same as the invoice date (see above).

·        Material group: It is a key used to group together several materials or services with the same attributes, and assign them to a particular material group. The various categories of goods and services that fall under the purview of the PPA fall into separate material groups.

·        PPA due date: The date on or before which a payment should be made under the Prompt Payment Act. This date will be either the latest date available to take a discount, if the discount is economically justified, or the latest date available to pay and avoid interest penalties.

·        PPA interest rate:  Same as “applicable interest rate” (see above).

·        Reason codes: These identify the reasons why an agency paid a late penalty and/or an additional late penalty. An example would be a delay in the paying office’s receipt of receiving report.

·        SAP Baseline date: The date to which the payment terms are applied to calculate the effective due date (see above). For example, if the payment term is Net30 (that is, net due in 30 days), the SAP due date is calculated by adding 30 days to the baseline date.

·        Treasury current value of funds rate (CVFR):  The interest rate to be used for comparison to the vendor’s discount rate in order to determine whether or not to take the vendor discount. This rate is set annually by the US Treasury, effective on January 1.

·        Treasury payment date:  The date that Treasury issues the checks or processes the electronic funds transfer. Calculated as the payment run date plus treasury processing days.

·        Treasury processing days (also called negative grace days or time lag):  The number of business days between when an agency initiates a payment run and the Treasury payment date. Treasury Processing Days are defined for each payment method.

·        Treasury processing date: This is the date on which Treasury is expected to make the disbursement. Disbursement could be either in the form of an electronic funds transfer (EFT) or a check.