This article explains how to use the Interest Charging utility to charge customers for interest and/or fixed charges on overdue debtor accounts
TABLE OF CONTENTS
Interest Rates
Interest rate settings can be found in the Account Information tab of the Maintain Customer screen:
- System Rate is the default setting - this means interest will be charged at the rate set in the Interest Charging utility
- Specific Rate will override the "System Rate" - the Annual Interest Rate box will display when you choose this rate
- Never - choosing this option means that this debtor will not be included in the Interest Charging process
Interest Charging utility
In SAM please go to Misc and choose Interest Charging:
The Debtors Interest Charging window will display:
Start by checking the options/settings in the bottom left hand corner of the window.
- Include Ageing - select the ageing of the overdue debtor balance on which you want to charge interest/fees
- Annual Interest Rate - note that this is the annual or "per annum" interest rate
- Add GST - tick this box if you are charging GST in addition to interest/fixed charge - check with your accountant if you need advice on this
- Fixed Charge - gives you the option to charge a fixed amount on overdue accounts. You can charge this on its own, for example as a "monthly account fee" or in addition to interest charges
- Date Range - this defaults to the system month but can be adjusted as required
- Number of Days - the system will calculate the number of days based on the Date Range
- Posting Description - this will display on the debtor account and on debtor statements and can be edited as required
- GL Code - choose the relevant GL code and please check with your accountant if required
In the above example we want to charge interest to customers who have an overdue balance in 60 days and over, the annual interest rate is 24%, there is no fixed charge in addition to the interest being charged, and the calculation is for May 2024.
When you have checked your options/filters then click Generate List to display the list of customers and their interest charges:
You can use the Modify and Delete buttons if you want to change the amount being charged or if you don't want to charge the customer.
For example, you might delete the charge for the customer 7DAY because you don't want to process a charge for 99 cents.
Note that the customer BROWN/J is being charged at a different rate to all other customers because she has 40% set as a "Specific Rate" in the interest rate settings in Maintain Customer
How Interest Is Calculated
The Interest Charge is calculated by applying the annual interest rate percentage to the specified balance, then dividing this value by 365 days and multiplying it by the number of days to be charged. To this added any Fixed Charge and GST.
Overdue Amount x Annual Interest Rate / 365 Days x Number of Days = Interest Charge
Example:
Using the customer OHARA/J as an example:
Their outstanding balance is $440.00
440.00 x 24% = $105.60 - this is the amount if you were charging interest for a full year
105.61 / 365 = 0.2893 - this is the daily interest
0.2893 x 31 = $8.97 - this is the charge for 31 days, ie for May 2024
Process Interest Charges
After you have checked the list and ready to process the charges then click on the Process button
Choose Yes to finish the process or No to go back and review the list.
Choosing "Yes" will close the Interest Charging window, process the charges and you will see them on the debtor accounts, for example:
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