The Illinois Prompt Payment Act, Explained for Vendors

There are two Illinois prompt payment acts, and almost every vendor who gets this wrong gets it wrong in the same direction: they read about the State act, calculate interest they believe they are owed, and then discover their invoice was never covered by it.

• 30 ILCS 540 — the State Prompt Payment Act. Binds State officials and agencies.
• 50 ILCS 505 — the Local Government Prompt Payment Act. Binds counties, municipalities, school districts and the rest of local government.

If you invoice the City of Chicago, Cook County, a park district or a school district, the State act does not apply to you. You are not unprotected — the local act covers you — but the timelines and the state programs built on the State act are different. Sorting out which one you are under is the first useful thing you can do.

The State Prompt Payment Act (30 ILCS 540)

Who it binds

The Act governs payment by State officials and agencies. Its companion definition is the one that decides when your clock starts:

"As used in this Act, 'a proper bill or invoice' means a bill or invoice, including, but not limited to, an invoice issued under a contractual grant agreement, that includes the information necessary for processing the payment as may be specified by a State agency and in rules adopted in accordance with this Act."

Note the phrase as may be specified by a State agency. What makes a bill "proper" is partly the agency's own documented requirements — which is why an invoice that is complete by your standards can still fail to start the clock.

One addition is easy to miss: since 1 July 2021, a proper bill or invoice must also include "the names of all subcontractors or subconsultants to be paid from the bill or invoice and the amounts due to each of them, if any." If you use subcontractors and your invoice does not name them and their amounts, it may not be a proper bill.

The clock is 90 days, not 60

This is the most commonly misstated fact about the Act, and the reason is that Section 3-2 contains two rules — an older one and the one actually in force — and most secondary sources quote the older one. So it is worth reading both, in order, from the statute itself.

Paragraph (1) sets a general rule of 60 days. This is the superseded half. Do not plan against it:

"Any bill... approved for payment under this Section must be paid or the payment issued to the payee within 60 days of receipt of a proper bill or invoice. If payment is not issued to the payee within this 60-day period, an interest penalty of 1.0% of any amount approved and unpaid shall be added for each month or fraction thereof after the end of this 60-day period, until final payment is made."

Paragraph (1.05) then overrides it, and the override is not temporary:

"For State fiscal year 2012 and future fiscal years, any bill approved for payment under this Section must be paid or the payment issued to the payee within 90 days of receipt of a proper bill or invoice. If payment is not issued to the payee within this 90-day period, an interest penalty of 1.0% of any amount approved and unpaid shall be added for each month, or 0.033% (one-thirtieth of one percent) of any amount approved and unpaid for each day, after the end of this 90-day period, until final payment is made."

"For State fiscal year 2012 and future fiscal years" means the 90-day rule is the operative one today, and every fiscal year since 2012 has fallen inside it. The current State rule is 90 days, then simple interest at 1.0% per month — equivalently 0.033% (one-thirtieth of one percent) per day — on the approved and unpaid amount.

Plan around 90 days, not 60. If you have seen "Illinois pays interest after 60 days" stated as current — and it is repeated widely — that source is quoting paragraph (1) without paragraph (1.05).

Section 3-2 also requires the agency to review a bill in a timely manner and, where it finds a defect that prevents processing, to say so — a disapproved invoice should not simply go quiet.

The interest, and the thresholds that swallow small claims

Simple interest runs at 1.0% per month, or 0.033% per day, on the approved and unpaid amount. Two thresholds decide whether you ever see it:

"the State official or agency shall automatically pay interest penalties required by this Section amounting to $50 or more to the appropriate vendor. Each agency shall be responsible for determining whether an interest penalty is owed and for paying the interest to the vendor. Except as provided in paragraph (4), an individual interest payment amounting to $5 or less shall not be paid by the State. Interest due to a vendor that amounts to greater than $5 and less than $50 shall not be paid but shall be accrued until all interest due the vendor for all similar warrants exceeds $50, at which time the accrued interest shall be payable."

So: $50 or more is paid automatically and the agency is responsible for working out that it is owed. Between $5 and $50 it accrues rather than being paid, until the running total crosses $50. At or under $5, it is not paid at all.

Two further points. Bills under Article V of the Illinois Public Aid Code have their own treatment, including a 2.0% monthly rate for certain non-pharmacy, non-nursing-facility bills. And the automatic-interest provision applies only where "different late payment terms are not reduced to writing as a contractual agreement" — a written agreement on late payment terms displaces the default.

The Local Government Prompt Payment Act (50 ILCS 505)

If your customer is local, this is your statute. It is shorter and its clock is tighter.

Section 2 sets the scope broadly:

"This Act shall apply to every county, township, municipality, municipal corporation, school district, school board, forest preserve district, park district, fire protection district, sanitary district and all other local governmental units. It shall not apply to the State..."

Section 3 gives 30 days to approve or disapprove, running from receipt of the bill or receipt of the goods or services, whichever is later. Disapproval requires that written notice "shall be mailed to the vendor or contractor immediately." Where safety or quality-assurance testing is needed and cannot finish within 30 days, the deadline becomes immediately on completion of testing or 60 days after receipt of the goods, whichever comes first.

Section 4 gives 30 more days to pay after approval, then 1% per month on the approved and unpaid amount.

Section 5 handles the case where nobody acts at all: if the official fails to approve or disapprove within the Section 3 window, the penalty is computed from 60 days after receipt of the bill, or 60 days after the goods or services were received, whichever is later.

Section 6 is the one to check your contract against: the periods in Sections 3, 4 and 5 "are superseded by any greater time periods as agreed to by the local government agency and the particular vendor or contractor." A contract can lawfully give the body longer. It is the statute that fills a silence, not a term that overrides your agreement.

Section 9 governs money flowing down. When a contractor receives payment on a public construction contract, it must pay subcontractors and material suppliers in proportion to work completed, less retention — and critically, "All interest payments received pursuant to Section 4 also shall be disbursed to subcontractors and material suppliers to whom payment has been delayed, on a pro rata basis." Prompt-payment interest is not the prime's to keep. A prime that fails, without reasonable cause, to pay its subcontractors and material suppliers within 15 days of receiving payment owes them interest at 2% per month under the same section — double the 1% per month the local government owes the prime.

Where the Illinois Vendor Payment Program fits — and where it doesn't

The Vendor Payment Program (VPP), run through Illinois CMS, is a voluntary program that lets vendors sell their delayed State receivables to approved third parties known as Qualified Purchasers. The Qualified Purchaser takes assignment and collects the prompt-payment interest that accrues, which is the vendor's only cost.

The vendor receives full face value less any State offsets, but in two parts, not one: an initial payment of 90% of the purchase price, followed by the remaining 10% once the State pays the Qualified Purchaser both the invoice and the prompt-payment penalty. CMS's "100% of value, free of cost" framing is accurate about the total and silent about the timing.

Eligibility, per CMS, requires that the receivable is:

1. "Eligible to accrue Prompt Payment Penalty interest under the State of Illinois' Prompt Payment Act"
2. "At least 90 days past due"
3. "Free of any liens or encumbrances"

CMS also states plainly that "Medical Assistance receivables are NOT eligible for the Vendor Payment Program."

Now read condition 1 against everything above. The receivable must accrue interest under the State act. A Cook County invoice, a City of Chicago invoice, a school district invoice and a park district invoice accrue interest — if at all — under 50 ILCS 505, which is a different statute. They are therefore outside the VPP by construction, not by oversight.

This is the single most useful thing to understand about the VPP: it is a State-receivables program. If your unpaid invoices are with local government, the VPP is not the answer, and no Qualified Purchaser can make it one.

What to actually do

1. Identify which act covers each customer. State agency, or local body? That determines your clock, your interest rate, and whether the VPP is even on the table.
2. Make the invoice "proper." Meet the agency's documented requirements, and if you use subcontractors on a State invoice, name them and their amounts — that has been a statutory element since July 2021.
3. Date everything. Interest runs from receipt of a proper bill. Keep evidence of when you sent it and what it contained.
4. Check your contract's payment terms. For local bodies, a negotiated longer period displaces the statutory default under Section 6.
5. Don't chase small interest. Under the State act, below $5 is never paid and $5–$50 accrues until the total crosses $50.
6. If it is a State receivable 90+ days past due, look at the VPP before assuming financing is the only route.

Where GoVendor fits

GoVendor works with government vendors on the operational side of this — getting invoices submitted correctly and tracking where they stand, which is what determines when the statutory clock starts at all. The prompt-payment framework above is the law regardless of who you work with, and the guidance in this article is worth following whether or not you ever use a financing product. Nothing here describes a partnership with, or endorsement by, the State of Illinois, CMS, or any local body named.

Sources

• State Prompt Payment Act, 30 ILCS 540 — Illinois General Assembly
• Local Government Prompt Payment Act, 50 ILCS 505 — Illinois General Assembly
• Illinois CMS — Vendor Payment Program

Statutes read on 6 August 2026. This page is general information, not legal advice; contract terms and agency rules can change how these provisions apply to a specific invoice.