In today’s economic environment, governments are adopting ever more stringent austerity plans to reduce their deficit spending. As a result, businesses that provide goods or services to governments must strictly adhere to applicable government regulations to ensure payment. For small businesses providing goods or services to the Commonwealth of Pennsylvania there is a law allowing the small business to recover interest for late payments, but only if the business takes certain steps. The Fiscal Code provides that if a Commonwealth agency acquires property or services from a qualified small business concern and does not make payment by the required payment date it must pay an interest penalty. A “qualified small business concern” is an independently owned and operated for-profit business employing 100 or fewer employees. A subsidiary or affiliate of a corporation does not qualify if the corporation does not qualify. Note that, to be eligible, the following information
must be included on the face of every invoice presented to the
Commonwealth: “(name of your business) is a qualified small business concern as
defined in 4 Pa. Code § 2.32.”
Here is an example of how this works:
Day 1 Commonwealth Agency receives proper invoice
Day 30 Required payment date
Day 45 End of grace period, no interest due
Day 50 Payment date, interest due from Day 31 through Day 50
Day 80 Final due date for payment of interest penalty
Day 81 Additional interest begins on interest payment date
The interest rate is based on the rate established by the Secretary of the Treasury of the United States. For 2011 the rate is 3% per annum. Accrual on an interest penalty will automatically cease 6 months from the date of the original invoice unless the qualified small business concern has notified the payment office or finance center in writing that the invoice was not paid by the required payment date.
In sum, if you are a small business providing goods or services to a Pennsylvania agency, include the above referenced language on every invoice and notify the payment office in writing that an invoice was not paid by the required payment date. If the payment remains outstanding contact the author of this article, Wayne S. Martin, by calling (717) 763-1383 or via email at WMartin@ReagerAdlerPC.com to discuss your rights and options to recover the outstanding debt.