Introduction - Set up and assign finance charge terms
Finance charge terms specify when and how finance charge memos are created. You must set up a code that represents each finance charge calculation. After the finance charge terms have been created, the Fin. Charge Term Code is assigned to the relevant customers.
Create finance charge terms
Set up finance charge terms with the following steps:
Select the Search for Page icon in the top-right corner of the page, enter finance charge terms, and then choose the related link.
Create a new line by entering the following fields:
Code - Unique code of the finance charge term.
Description - Short description of the finance charge term.
Interest Calculation - Determines which entries are used in the interest calculation on finance charge memos. The options in this field are:
Open entries
Closed entries
All entries
Interest Calculation Method - Determines the interest calculation method for this set of finance charge terms. The options in this field are:
Balance Due - The finance charge is a percentage of the overdue amount. [Finance charge = overdue amount * (interest rate/100)]
Average Daily Balance - This method considers how many days that the payment is overdue for open entries or how many days it's overdue when closed entries are paid. [Finance charge = overdue amount * (days overdue/interest period)*(interest rate/100)]
Interest Rate - Identifies the finance charge percentage that is charged when this finance charge type is used.
Interest Period (Days) - Identifies the number of days that are related to the interest rate, for example, 12 percent for 360 days or one percent for 30 days.
Minimum Amount (LCY) - Specifies the minimum interest charge in the local currency (LCY).
Additional Fee (LCY) - Identifies a charge in addition to the finance charge in the local currency (LCY).
When you select the Currencies action, you can also define many additional fees in foreign currencies.
When you create finance charges in a foreign currency, the foreign currency conditions that you have set up will be used to create finance charge memos. If no foreign currency finance charge conditions are set up, then the LCY finance charge conditions that are set up on the Finance Charge Terms page will be used and then converted to the relevant currency.
Grace Period - Determines the number of days that the customer ledger entry could go unapplied before a finance charge is assessed.
The first finance charge memo will be created if the document date on the finance charge memo header is after the due date of the customer ledger entry plus the grace period.
Any succeeding finance charge memos are created if the document date is after the due date of the last issued finance charge memo plus the grace period.
Due Date Calculation - Indicates the date formula that is used to determine how the due date is calculated on the finance charge memo. The due date is calculated from the document date.
Line Description - Identifies a description to be used in the Description field on the finance charge memo lines. Text variables can be used in this description.
Detailed Line Description - Specifies a description to be used in the Description field on the finance charge memo lines if multiple interest rates are set up for different payment delay periods and the description must show the sum of these.
Post Interest - If this check box is selected, any interest that is listed on the finance charge memo will be posted to the G/L and customer accounts when the finance charge memo is issued. The interest becomes an open customer ledger entry, for which a finance charge memo can be created and again interest can be calculated, when the entry becomes overdue.
The G/L account that you will use when posting is determined by the Interest Account field on the Customer Posting Group that is assigned to the customer.
Post Additional Fee - If this check box is selected, any additional fee that is listed on the finance charge memo will be posted to the G/L and customer accounts when the finance charge memo is issued. The additional fee becomes an open customer ledger entry, for which a finance charge memo can be created, when the entry becomes overdue.
The G/L account that you will use when posting is determined by the Additional Fee Account field on the Customer Posting Group that is assigned to the customer.
Add. Line Fee in Interest - Specifies that any additional fees are included in the interest calculation for the finance charge.
Write beginning and ending text
For each finance charge term, you can specify text that will be printed before (Beginning Text) or after (Ending Text) the entries on the finance charge memo.
Beginning and ending text lines can:
Be added for each finance charge term.
Contain instructions on the payment and the result of nonpayment.
Include several predefined text variables.
Follow these steps to enter the texts:
On the Finance Charge Terms page, select the line with the finance charge term that you want to set up texts for, select Related > Terms, and then select Beginning Text or Ending Text.
Add as many text lines as you want.
You can also use the placeholders that are shown in the following table to automatically insert related values in the resulting finance charge memo text.
| Placeholder | Value |
|---|---|
| %1 | Content of the Document Date field on the finance charge memo header |
| %2 | Content of the Due Date field on the finance charge memo header |
| %3 | Content of the Interest Rate field on the related finance charge terms |
| %4 | Content of the Remaining Amount field on the finance charge memo header |
| %5 | Content of the Interest Amount field on the finance charge memo header |
| %6 | Content of the Additional Fee field on the finance charge memo header |
| %7 | The total amount of the finance charge memo |
| %8 | Content of the Reminder Level field on the reminder header |
| %9 | Content of the Currency Code field on the reminder header |
| %10 | Content of the Posting Date field on the reminder header |
| %11 | The company name |
| %12 | Content of the Add. Fee per Line field on the reminder header |