5.17 Processing And Paying Invoices

5.17.1   Objective

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

5.17.2   The Accounts Payable Function

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.

5.17.3   Appropriate Invoices

The foundation 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.
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 Foundation.
4. Invoices written in pencil will not be accepted by the foundation.

5.17.4   Preparing Invoices for Approval and Payment

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.
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. UTFI is only sales and use tax exempt in TN.
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. (G/L Account List)
7. All departments with the exception of HSC and UTM will scan invoices to the UTFI business office email address for processing. Originals are kept in the departments for a period that complies with the Foundation’s retention policy. The invoices for HSC and UTM will be entered by those departments with the exception of invoices that must be processed centrally (See 5.17.6 below).
8. The invoice information must be entered into the foundation’s accounting system for processing and payment by the UTFI business office for all departments with the exception of HSC and UTM. The document number generated by the accounting system should be written on the invoice.

5.17.5   Approving Invoices for Payment

1. The IRIS User ID Request/Changes Form is used to establish approvers for the accounting system.

1. Upon receipt of materials or services identified on an invoice, an appropriate and properly prepared invoice can be approved for payment.
2. The employee authorized to approve expenditures for the department must approve by signing all invoices in ink. For departments approving invoices electronically, the approver must sign or initial the invoice and refer directly to it while performing the approval process.
3. To comply with the Foundation’s retention policy all invoices should be kept in departmental files for one year.

5.17.6   Invoices Processed Centrally

Most invoices for HSC and UTM may be entered in the foundation accounting system by the department. However, the chief financial officer or designee 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.
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.

Departments are responsible for maintaining copies of all invoices and forms sent to the chief financial officer or designee for central processing. Copies should be kept in the department for one year after payment.

5.17.7   Refunds

1. The foundation 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 authorization of refunds. These refund policies must be reviewed and approved by the chief operating officer. Departments are responsible for entering their own refunds in IRIS.
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, WBS element, general ledger account where the refund is to be charged (usually the same cost center, fund, WBS element, general ledger account of the original receipt)
   • the department head’s approval

5.17.8   Prompt Payment

1. The foundation must pay vendors in accordance with the terms of the contract or purchase order. 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.
2. Documentation by Department. Departments are responsible for maintaining proper documentation to ensure compliance with the prompt payment. 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.
   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.
3. 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.
4. 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.
   3. Information from the invoice for interest should be entered into the accounting system and approved by the department for processing and payment.
5. 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.

5.17.9   Deadline for Fiscal Year Expenditures

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.

Maintenance agreements beginning in July, or subscriptions and memberships beginning in September or later, must be paid from funds for the following fiscal year.

Updated: June 1, 2021