Interest calculation on overdue invoices

You can generate interest invoices for overdue invoices. In addition, after generating and sending an interest invoice, you can generate a subsequent interest invoice for the next period.

In the Interest Percentages (tfacr5102m000) session you can define the interest percentages for each financial business-partner group, and for different periods of days.

The interest period

For an interest invoice, LN calculates the interest amount over a specific period. LN determines the number of days of this period as follows:

  • The start date
    • If interest invoices were already generated earlier, the start date is the end date of the most recent period for which the interest was calculated. for each open entry, LN records the date on which an interest invoice advice was last transferred to Invoicing.
    • If no interest invoices were already generated, the start date is the due date of the invoice or the planned receipt date of the transaction schedule line.
  • The end date
    • For documents of the Sales Invoice type, the end date is the Interest As on Date date entered in the Select Invoices for Interest Invoicing (tfacr5210m000) session.

    • For documents of the Normal Receipt and the Assignment type, the end date is the earliest of the following dates:

      • The document date.
      • The Interest As on Date date entered in the Select Invoices for Interest Invoicing (tfacr5210m000) session.
Interest calculation

The interest amount is calculated in the invoice currency. The general formula to calculate interest amounts is:

Interest amount = invoice amount * (payment date - due date) / 365 * (interest %) / 100

For receipts and for the paid part of partly paid invoices, this results in the following calculation:

Interest amount = Paid invoice amount * actual interest rate on the payment date / number of days in year * (receipt date - due date or previous interest calculation date)

For unpaid invoices, this results in the following calculation:

Interest amount = Open invoice amount * actual interest rate on the interest invoice date / number of days in year * (interest invoice date - due date or previous interest calculation date)

Depending on the value of the Int Inv Sel Based On field inthe Interest Invoice Parameters (tfacr5101s000) session, LN calculates the interest on the receipt amounts, on the remaining open invoice amount, or both, as follows:

  • Fully Paid Invoices
    LN calculates the interest on the receipt amounts.
  • Partly and Fully Paid Invoices
    LN calculates the interest both on the receipt amounts and the remaining open invoice amounts.
  • Paid and Unpaid Invoices
    LN calculates the interest both on the receipt amounts and the open invoice amounts.

All received payments and credit notes are considered to determine the remaining open amount of the sales invoice. Once the remaining open amount is equal to zero no further interest is calculated.

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