FI0505 – Processing and Paying Invoices

Effective: March 1, 2011
Revision No: 10
The Accounts Payable Function Prompt Payment
Appropriate Invoices Deadline For Fiscal Year Expenditures
Preparing Invoices For Approval And Payment Forms
Approving Invoices For Payment Procedures
Invoices Processed Centrally Contacts
Refunds Related Policies

To provide guidelines and procedures for university staff processing materials and approving and paying invoices for goods or services.


The Accounts Payable Function [top]

  1. Whenever staffing allows, the duties of processing payments and performing the monthly reconciliation of the department’s cost center or WBS elements should be separated as follows.

    1. Processing Payments. One employee should requisition and receive goods and process the invoice for approval.
    2. Ledger Reconciliation. An employee who has no responsibility for requisitioning, receiving, or entering invoices to the accounting system should reconcile the department’s accounts payable documentation (such as invoices, internal transfers) to the departmental ledgers each month.

Appropriate Invoices [top]

  1. The university will pay for materials or services upon receipt of all goods and services and receipt of an original, itemized invoice. An appropriate invoice has the following characteristics.

    1. An original invoice is required for all purchases of materials and services. If an original invoice cannot be obtained, a photocopy, facsimile, or certified copy can be used for payment provided an explanation is written on the invoice or an attached memo.
    2. Invoices must be itemized to identify the quantity and price for all items purchased.
    3. All invoices must be billed to the University of Tennessee.
    4. Invoices written in pencil will not be accepted by the university.

Preparing Invoices for Approval and Payment [top]

  1. The following procedures should be followed when preparing invoices for approval and payment.

    1. Upon receipt of an invoice, the date received (month, day, year) must either be written or stamped on the invoice (see Appendix A).
    2. Invoices must be compared to (1) the delivery ticket (when available) to verify that all materials have been received and (2) the purchase or requisition order to verify quantities and price. If a purchase order was issued, the purchase order number must appear on the invoice. If this number is not preprinted, the department must write it on the invoice.
    3. Invoices must be verified for mathematical accuracy. If an error is discovered, the department should either contact the vendor and request a revised invoice or receive verbal approval from the vendor to correct the invoice. If an invoice is revised, the name of the individual with the vendor who authorized the change must be written on the front of the invoice.
    4. Prompt payment discounts should be taken whenever possible. Invoices with cash discount terms should receive priority processing to help ensure payment within the discount period. If a difference exists between discount terms on a purchase order and those on an invoice, the discounts most favorable to the university must be taken. Discounts do not apply to freight items.
    5. Tennessee sales tax should be deducted. Tennessee sales tax exemption forms can be obtained from the campus or institute purchasing department or the Treasurer's Office. (See Appendix A in FISCAL POLICY FI0525.)
    6. The cost center/WBS element(s) and appropriate general ledger (G/L) account(s) to be charged must be written on the front of the invoice.
    7. Before processing certain types of invoices, the following special requirements should be noted:

      • For movable equipment and sensitive minor equipment, an asset record must first be created in the university's accounting system. For more details, see FISCAL POLICY FI0605, 15.
      • For paying moving allowances , see the guidelines in FISCAL POLICY FI0450 .
      • For entertainment expenses, invoices must contain all information identified in FISCAL POLICY FI0715.
      • For printing documents for distribution outside the department, such invoices (charged to G/L 433100) must contain a publication authorization number. Contact the designated campus or institute department for information on obtaining this number (or waiver from obtaining a number).
    8. The invoice information must be entered into the university's accounting system for processing and payment. The document should be scanned and attached to the IRIS transaction.

Approving Invoices for Payment [top]

  1. The IRIS USER ID REQUEST/CHANGES FORM is used to establish approvers for the university's accounting system. FISCAL POLICY FI0150 provides the overall guidelines for identifying approvers and authority for delegating approvals.

    1. Upon receipt of materials or services identified on an invoice, an appropriate and properly prepared invoice can be approved for payment (see 1 and 2 above).
    2. The employee authorized to approve expenditures for the department must review the attached invoice in IRIS before approving.
    3. To comply with the University’s retention policy all invoices should be kept in departmental files for one year after the invoice was attached to the IRIS transaction.

Invoices Processed Centrally [top]

  1. Most invoices may be entered in the university accounting system by departments that are established to do so. However, the Treasurer's Office must enter and process the following items.

    1. Invoices with the amount to be paid shown in a foreign currency. The cost associated with converting the currency to U.S. dollars will be billed to the cost center/WBS element charged for the transactions.
    2. Invoices for personal services contracts, regardless of who is providing the service.
    3. Invoices to non-resident aliens, even if the amount is in U.S. dollars. A completed I-94 must accompany the invoice or request for payment.
    4. Credit memos when a check is requested from the vendor instead of a credit.
    5. FORM T-27 for request for special payment. (See FISCAL POLICY FI0515.)

The following items must be processed and entered by either the Treasurer's Office or campus/institute business office.

  1. Invoices for payment of travel expenses paid directly to a vendor. (See FISCAL POLICY FI0705.)
  2. FORM T-30 for prepayment of conference and seminar registration fees.

Note: For invoices processed centrally, the vendor's federal identification number must appear on the face of the invoice. If this number is not preprinted, the vendor should be contacted and the department should write it on the front of the invoice. A social security number or federal identification number is required for all invoices when the payee is an individual.

Departments are responsible for maintaining copies of all invoices and forms sent to the Treasurer's Office or Campus Business Office for central processing. Copies should be kept in the department for one year after payment.

Refunds [top]

  1. The university returns funds to individuals, institutions and companies for a variety of reasons including: overpayments, duplicate payments, payments received in error, cancellations and some deposits. Each department that issues refunds must develop and follow its own policy concerning the amount and allowability of refunds. These refund policies must be reviewed and approved by campus Chief Business Officers. Departments are responsible for entering their own refunds in IRIS. (Campus Chief Business Officers can require refund processing to be handled centrally by Campus Accounts Payable Department.)
  2. Each refund must be supported by documentation that includes:

    • the name of the person, institution or company receiving the refund (original payor)
    • the mailing address
    • the reason for the refund
    • the university receipt number or deposit information of when the money was originally received
    • the dollar amount of refund
    • the cost center, fund, WBSE, general ledger account where the refund is to be charged (usually the same cost center, fund, WBSE, general ledger account of the original receipt)
    • the department head’s approval

See REFUND FORM. The refund form or supporting documentation must be retained in the department for 6 years.

Prompt Payment [top]

  1. Prompt Payment Act. In 1985, the Tennessee General Assembly enacted the Prompt Payment Act. This legislation established vendors' rights to collect interest from state agencies on delinquent accounts at 1.5 percent per month on the outstanding balance.

The university must pay vendors in accordance with the terms of the contract or purchase order. University purchase orders generally specify that payment should be made within 30 days after the merchandise is received. When specific terms are not provided, to avoid interest charges payment must be made within 45 days of receipt of the invoice or date the goods or services were received, whichever is later.

  1. Documentation by Department. Departments are responsible for maintaining proper documentation to ensure compliance with the Prompt Payment Act. This may be accomplished by performing the following:

    1. Upon receipt of an invoice, the date received (month, day, year) must either be written or stamped on the invoice (see Appendix A).
    2. If the invoice is received before the goods, the date the goods are received (or services performed) should be written on the invoice or delivery ticket. Payment terms will begin when the goods are received.
    3. Any other unusual circumstances should also be documented, such as defective goods, partial shipments, grace periods (e.g., library books), etc.
  2. Interest Payments to Vendors. Interest payments for delinquent accounts will be made only upon receipt of an original invoice from the vendor and verification that such payment is due. The department is responsible for this verification.

The following steps should be followed when paying an invoice that contains an interest charge.

    1. The original invoice and the contract or purchase order number should be referenced on the original interest invoice.
    2. All interest payments must be charged to the cost center/WBS element used for the original invoice. General ledger account 442300 should be used for the interest expense classification.
    3. Information from the invoice for interest should be entered into the university's accounting system and approved by the department for processing and payment.
  1. Invoices for Interest Not Due. If the department determines that an invoice for interest is not due, the department must notify the vendor and provide the necessary documentation and/or reasons to refute the interest charge.

Deadline for Fiscal Year Expenditures [top]

  1. Departments should note the following guidelines to ensure the prompt submission of expense items.

    1. Designated personnel in each department must process invoices, payrolls, cash items, travel expenses, and return all undelivered checks prior to the close of the fiscal year.
    2. All expense items incurred before June 30 must be paid in the current fiscal year and may not be held and charged against the following fiscal year.
    3. Outstanding purchase orders greater than $5,000 for which items are not delivered before June 30 will be encumbered against appropriations for the following fiscal year.
    4. Maintenance agreements beginning in July, or subscriptions and memberships beginning in September or later, must be paid from funds for the following fiscal year.

Forms[ top]

Health Science Center:
Institute of Agriculture:


Cindy Stockdale  (865) 974-2580