How Are Charges Calculated?
There are two methods for calculating finance charges: detail and net. The program calculates the charges depending on the calculation method selected for each customer in Customer (AR10.1). Both methods reduce any past due amount by the total amount of open payments and credit memos as of the date you specify. Only the payments and credit memos having a date on or before the date you define are used to reduce any past due amount.
Both calculation methods process open invoices and debit memos by transaction date. Charges are assessed as follows:
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If using the Detail method and a previous finance charge has been assessed for the open item, the assessment date is the last finance charge date. If using the Detail method and a previous finance charge has not been assessed for the open item, or finance charges are being assessed using the Net method, the assessment date is the due date of the open item plus the grace days defined for the customer in Customer (AR10.1).
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If the assessment date is before the date you define, the open item is past due.
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If the open item is in dispute and the customer selected No in the Disputes Financed field in Customer (AR10.1), the past due amount is reduced by the amount in dispute.
Detail Method
The detail calculation method can only be used for open item customers.
The detail method reduces individual past due open items, beginning with the oldest open item, by the total amount of open payments and credit memos. If an open amount remains, the finance charge is calculated by
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multiplying the open amount by the number of days past due divided by thirty days and multiplying that product by the finance rate defined for the finance code assigned to the customer.
The detail method also assesses late payment charges. The difference between the deposit date of the payment and the due date plus grace days defined for the customer in Customer (AR10) is the number of days paid late. The late charge is calculated by
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multiplying the applied amount by the number of days paid late divided by thirty days and multiplying that product by the finance rate defined for the finance code assigned to the customer.
If the customer has been flagged (Yes) to be charged for minimum charges in AR10, charges are assessed as follows.
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If the total assessment for a customer is less than the minimum charge amount defined for the customer, the minimum charge is assessed.
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If the total assessment for an invoice is less than the invoice minimum charge defined for the customer, the invoice minimum charge is assessed.
If the customer has been flagged (No) to be charged minimum charges in AR10, no charges are assessed if:
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the total assessment for a customer is less than the minimum charge amount defined for the customer or
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the invoice charge assessment is less then the invoice minimum charge amount defined by the customer.
If the customer has no minimum charge defined and no minimum charge or invoice minimum charge amounts are specified, the system calculates the finance charges according to the finance rate (or rates) defined for the finance code.
Net Method
The net calculation method can be used by open item customers and is the only method available for balance forward customers. Late payment charges are not applicable. The net method reduces the total amount past due by the total amount of open payments and credit memos. If a past due amount remains, the finance charge is calculated by multiplying the past due amount by the finance rate assigned to the customer in Customer (AR10).
If the customer has been flagged (Yes) to be charged for minimum charges in AR10, has minimum charges defined, and the total assessment for a customer is less than the minimum charge amount, the minimum charge is assessed.
If the customer has been flagged (No) to be charged minimum charges in AR10, and no minimum charge amount is specified, the system the finance charges according to the finance rate (or rates) defined for the finance code.
If the customer has been flagged (No) not to be charged minimum charges in AR10, and has no minimum charges defined, the system calculates the finance charges according to the finance rate (or rates) defined for the finance code.