To:        Chief Fiscal Officers and MMARS Liaisons

From:     Martin J. Benison, Comptroller

Date:      April 26, 2013

Re:         Prompt Payment Discount Statistics Summary for FY2013 – Third Quarter FY2013  

Comptroller Memo FY#2013-22


Executive Summary

The purpose of this memo is to update CFOs and MMARS Liaisons on departments’ utilization of the Commonwealth’s Prompt Payment Discount (PPD) program during the first 9 months of FY2013.  For the third quarter of FY2013, an additional $1,887,934 of PPD were taken by over 110 departments.  Prompt payment discounts have and will continue to help maximize your department’s line item spending power.


 

FY08

FY09

FY10

FY11

FY12

FY13 QTR 1, 2 & 3 only

Discounts Taken

$3,373,000

$4,099,000

$4,655,000

$5,526,000

$6,973,832

$5,760,293

Discounts Not Taken

$1,824,000

$1,645,000

$1,519,000

$1,972,000

$1,874,287

$1,412,441

Prompt payment discount savings are approaching $8 million annually.  The success of this program continues into fiscal year 2013 and there continue to be opportunities to expand your usage.

The Commonwealth’s Prompt Payment Discount Program (PPD) has always resulted in savings both to our vendors and departments.  During the first 9 months of FY2013, the Commonwealth continued to increase steadily its opportunities for discount savings.

Vendors who are not offering discounts should be approached to enroll in the PPD Program now.  With a tight budget and a tight credit market, PPD is a sensible means for departments to save money and to provide timely cash flow to vendors who offer PPD.  Even with the success in FY2012, there were almost $1.9 million of prompt payment discounts available, recorded on encumbrances, but not taken - a lost opportunity.

Departments can increase PPD dollars by reviewing the “Discounts Not Taken Report” and instructing Accounts Payable staff to process payments consistent with discount terms.  CTR will continue to assist departments by identifying contracts that could potentially offer prompt payment discounts.  In addition to the listing of Active MAs that offer prompt payment discounts, CTR posts a list of vendors that offer discounts on department contracts under the Payments web page.  The list, refreshed daily, is derived from department encumbrances in final status which offer prompt payment discounts in FY2013.

Successful discount implementation needs the full support and participation of each department’s payment, contract and vendor management staff.  Departments should verify that the discount terms entered on encumbrances are accurate in both the vendor and commodity lines.  Departments processing invoices in a timely manner should assure that the discounts offered are taken automatically.

To analyze and report FY2013 activity, the following attachments offer department specific and summary data.

Attachment A xls format of FY13-22-attch-a is a report sorted by department for the third quarter of FY2013.  This report shows discounts taken, partial discounts taken and discounts missed due to payments scheduled after the discount terms expired.  Capturing future discounts is within each department’s control.

Attachment B xls format of FY13-22-attch-b is a statewide summary discount report for the first, second and third quarters of FY2013.

To assist departments now for FY2013 business, we have prepared the query of encumbrance activity to include all departments’ FY2013 encumbrances in those object codes that generate discount savings.

Attachment C xls format of FY13-22-attch-c is a report that summarizes by department FY2013 encumbrances on MMARS that are eligible for discounts as of March 31, 2013.  The charts below summarize all departments.

FY2013 Encumbrances With and Without Discount

Dept.

Total Dollars Encumbered Eligible for Discount

Dollars Encumbered with Discount

Dollars Encumbered without Discount

% of total dollars with Discount

% of total dollars without Discount

All 

$3,746,968,342.24

$499,388,780.05

$3,247,579,562.19

13.3%

86.7%

Dept

Count Total Encumbrances Eligible for Discount

Count Encumbered with Discount

Count Encumbered with no Discount

% of encumbrances with Discount

% of encumbrances without Discount

All

60,770

30,869

29,901

50.8%

49.2%

As illustrated in the charts above, the first nine months of FY2013 activity reflects a high volume in dollars and count of active encumbrances/contracts that do not offer discounts.

Attachment D xls format of FY13-22-attch-d file size 6MB lists encumbrance transactions “with discount” on one tab and those encumbrances in selected object codes offering “no discount” on the second tab. It is sorted by department, transaction, DOC ID and dollar amount for FY2013 as of March 31, 2013.  Records can be filtered by department.  Those encumbrances in the “no discount” tab should be discussed with the vendor for the addition of prompt payment discount terms.  It is crucial that department CFOs and Contract Managers review these contracts and take the initiative to capture lost opportunities by encouraging the vendors to offer mutually agreeable discount terms.

The Prompt Payment Discount Policy states that “Even if a Department has not included the Prompt Payment Discount Form as part of the RFR process, or for contracts when a procurement is not required, the department is strongly encouraged to have a Contractor complete a Prompt Payment Discount Form during the contract execution, renewal or amendment process to ensure that Prompt Payment Discounts are available to the maximum extent possible.”

Through queries, CTR has identified eligible contracts with many vendors who offer discounts on other department contracts.  The information is forwarded to department fiscal staff to assist them in negotiating with vendors.   It is crucial that CFOs and Contract Managers review the discounts missed report and instruct relevant staff to ensure payments are processed on a timely basis so the department can receive the maximum discount offered under the contract. 

To assist with department discount analysis, CTR has provided starter queries that departments can run in the Commonwealth Information Warehouse (CIW) to identify payments made with discount terms offered.  These Discount Starter Query instructions are available here.  

Please review your discount statistics and, if you have any questions, contact Michael Weld Eyob at (617) 973-2310 or Gabe Campos at (617-973-2362).

Enc:

  Attachment A xls format of FY13-22-attch-a  - FY2013 Third Quarter Department Discount Summary – Taken, Partial Taken, No Discount Taken
  Attachment B xls format of FY13-22-attch-b - FY2013 Commonwealth Discount Summary as of March 31, 2013
  Attachment C xls format of FY13-22-attch-c - FY2013 Encumbrance and Discount Opportunities Summary as of March 31, 2013
  Attachment D xls format of FY13-22-attch-d file size 6MB - FY2013 Encumbrance Listing as of March 31, 2013

 

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