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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Cash Management: A Tutorial for Local Governments and School Districts

Module 2: Timing of Disbursements

Examine the Timing of Vendor Payments

Check your payment schedules to see if you can save money by enhancing interest earnings or reducing your processing costs:

  • Vendors may offer discounts for paying claims early; take advantage of these discounts whenever possible.
  • If you are unable to take advantage of discounts due to the timing of payments, you may want to consider altering the bill paying cycle. Just remember, generally, claims need to be audited prior to being paid.
  • Certain claims may be paid without prior approval. The governing board may adopt a resolution permitting certain claims to be paid prior to the audit; however, please refer to the appropriate legal statutes for determining which claims may be paid without prior approval (i.e., Town Law, Section 118[2]).)
  • If you are paying claims twice a month, you may want to think about changing your payment cycle to once a month. Paying claims once a month allows you to earn additional interest for 26 weeks or 182 days per year (7 days x 26 weeks). For example, let's say that the total of claims you pay twice a month is approximately $200,000 ($100,000 x 2). If you are earning interest on the $100,000 for 182 days per year, the increased interest would amount to approximately $750 (if the interest rate is 3%) annually.

Although these earnings may not seem significant, combined with other procedural changes, they will add up. Beyond earning additional interest, employees responsible for processing checks would have more time to perform other accounting functions such as preparing cash flow projections, bank reconciliations, budget analyses, and financial statements. However, before changing payment dates of your disbursement cycles, check to see whether changes to your payment cycles will affect prices quoted by your suppliers and service providers.

  Next: Examine Your Payroll Schedule