A 50-year-old federal law forces agencies to pay automatic interest whenever they miss the 30-day invoice clock, no claim form required. Shutdowns and processing backlogs generate exactly the kind of lateness that triggers it. Most contractors never check whether they are owed it, and the money sits unclaimed on top of the original invoice they are already waiting on.
A Law Most Contractors Forget Exists
The Prompt Payment Act requires federal agencies to pay a contractor within 30 days of receiving a proper invoice, or of accepting the goods or services, whichever comes later. Miss that window, and the law does not leave it optional.
Per the Treasury Bureau of the Fiscal Service, in most cases when an agency pays a vendor late, the agency must pay interest. That obligation runs under 5 CFR Part 1315 and the FAR's own prompt payment clause, and it applies whether or not the contractor ever files a claim.
The catch is the conditions have to line up. The billing office needs a proper invoice on file, the government has to have accepted the work without a live dispute over quantity or quality, and the invoice cannot be tangled in a separate settlement action.
Shutdowns Are a Manufacturing Line for Late Invoices
During a lapse in appropriations, most agencies stop processing invoices altogether. Contractors can still submit them, but nothing gets officially received or accepted until funding returns.
That does not pause the payment clock the way a contractor might hope. Invoices submitted before a shutdown "will immediately exceed the 30-day payment window once officially accepted," as one federal contracting compliance resource put it after last fall's lapse, and the same dynamic repeats after every funding gap since.
Last fall's 43-day shutdown ran October 1 through mid-November 2025. Federal News Network reported that the reopening triggered exactly this: a wave of invoices crossing their 30-day mark all at once, and interest penalties accruing automatically across the backlog.
How a Shutdown Turns Into Owed Interest
- Contractor submits a proper invoice for accepted work
- Funding lapses; agency stops processing invoices
- 30-day payment window keeps running against the acceptance date
- Funding resumes; invoice is now past due
- Interest accrues automatically at the Treasury rate
- Agency owes principal plus interest, whether or not it is requested
What This Looked Like for One Real Contractor
A veteran-owned HUBZone IT reseller had roughly $20 million in outstanding invoices as of November 10, 2025, much of it tied to September 30 fiscal year-end purchase orders that got caught behind the shutdown, according to a contracting cash-flow analysis published in November 2025.
By that date, the unpaid balance had already generated approximately $74,000 in accrued interest under the Prompt Payment Act. That is money the government owes on top of the original $20 million, purely because payment ran past the statutory window.
| Detail | Figure |
|---|---|
| Outstanding invoices (as of Nov 10, 2025) | ~$20 million |
| Accrued Prompt Payment interest | ~$74,000 |
| Interest rate applied (H2 2025) | 4.625% |
| Current rate (H2 2026) | 4.75% |
Scale that one contractor's exposure across every firm with invoices caught behind three separate FY2026 funding lapses, and the unclaimed interest adds up to real money that mostly never gets requested, let alone collected.
Quick Check
A claim for interest still leaves the invoice unpaid.
Advance against the receivable itself while the paperwork works through the system.
Check Capital Eligibility →The One Move That Can Void the Whole Claim
The interest right depends entirely on the contractor having submitted a proper invoice on time in the first place. Holding an invoice back during a shutdown, on the theory that the agency will not process it anyway, can eliminate the claim entirely.
Guidance published after the fall shutdown was blunt about it: submit invoices per the contract terms regardless of whether the government is open to receive them, and keep dated proof of submission. Withheld invoices erase the paper trail that establishes government-caused delay, and without that trail there is no late date to calculate interest from.
The agencies themselves are not eager to volunteer this. Unbudgeted interest payments come out of the same operating funds that would otherwise cover hiring, overtime, or program spending, so a contracting officer has no institutional incentive to flag it proactively.
Interest Owed Is Not Cash in Hand
Even a contractor who tracks this correctly and gets the interest paid is still waiting on the underlying invoice first. The Prompt Payment Act adds a penalty on top of a late payment. It does not accelerate the payment itself.
That is the gap revenue-based financing sits inside. It advances against a contractor's existing receivables and cash flow, including invoices already accepted and simply stuck in a slow payment queue, rather than waiting on the agency's own processing timeline or a Prompt Payment claim to resolve.
It does not replace the interest a contractor is legally owed. It is a way to keep operating while that invoice, and whatever penalty sits on top of it, works through the system.
Prompt Payment Interest Estimator
How much interest could a late invoice actually owe you?
How to use this: enter your unpaid invoice amount and how many days it has run past the 30-day payment window. This gives a simple estimate at the current 4.75% annual Treasury rate, not a legal calculation of what an agency owes.
Next Move
Watch your own accounts receivable aging report for any invoice tied to work accepted during or right after any of this year's three funding lapses. Those are the invoices most likely to have quietly crossed the 30-day line without anyone flagging it.
Watch for a fourth potential lapse too. The current continuing resolution funds the government only through December 11, and every invoice submitted between now and then carries the same shutdown-interest exposure this article describes if funding lapses again.
Frequently Asked Questions
Yes, if the conditions in the Prompt Payment Act clause are met: the agency received a proper invoice, accepted the goods or services without dispute, and still paid after the 30-day window. The designated payment office is required to add the interest without the contractor asking for it.
Most agencies stop processing invoices during a lapse in funding. Contractors can still submit them, but they generally are not officially received or accepted until the agency reopens, at which point the 30-day payment clock is treated as already running from the original acceptance date in many cases, pushing the invoice into automatically late status.
The Treasury-set rate for July 1 through December 31, 2026 is 4.75%, reviewed and reset every six months. It applies to the number of days a proper invoice remains unpaid beyond the required payment date.
External Resource
Treasury Bureau of the Fiscal Service: Prompt Payment FAQs - the official rules, current interest rate, and calculator tools for verifying what an agency owes.
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