Calculating A/R Finance Charges

For each customer whom the Finance Charge check box is selected on the Customers form, the system looks at all open invoices, debits, credits, finance charges and payments.

If the system finds an invoice or debit, it performs the following:

TA * APR/365 * (BD - (LFCD or TDD)) = CFC

where:

CFC = Calculated Finance Charge
TA = Transaction Amount
APR = Annual Percentage Rate (from the Accounts Receivable Parameters form)
365 = days in a year
BD = Base Date (first choose Generate Charges)
LFCD = Last Fin Chg Date (from the Customers form)
TDD = Transaction Due Date

If the Last Fin Chg Date is more recent than the Transaction Due Date, the system uses the Last Fin Chg Date; otherwise, it uses the Due Date. The calculated amount is a positive finance charge. If a transaction is a credit or payment, the system calculates the transaction the same way, except the amount is a negative finance charge.

If a transaction is a finance charge transaction, the system calculates the finance charge only on this amount if the Compound Charges check box is selected on the Accounts Receivable Parameters form. In this case, the system calculates the amount the same way as invoices and debits.

After the system calculates all finance charge amounts, it sums them to arrive at the final finance charge amount for the customer.

Multi-Site A/R Finance Charge Calculations

Although the finance charge activity does run across sites, when run from the entity, they are not split to see where all the charges came from. The site that generated the finance charge is the only one with the finance charge transactions. See these examples:

Given these three examples, you will need to determine whether you want to have "centralized" or "decentralized" finance charge collections. the system automatically provides you with decentralized finance charge generation and posting. If you want to have only one of your sites be the collection point for finance charges, you must have defined customers in that one site for all customers that exist in all sites (as shown in Example 3). Once that is done, finance charge generation and posting should not be run at sites other than the collection site.