Create Interest Rule

This instruction explains how you set the rules for how interest should be calculated:

  • When creating interest invoices based on previously recorded customer invoices
  • When calculating interest to be stated in payment reminders.

Outcome

An interest rule is defined, regulating among other things, from which date the interest should be calculated, the annual interest percentage, minimum amounts, and invoice charge.

The rule can be reviewed in 'Interest Rule. Open' (CRS460)

By connecting an interest rule to each customer in 'Customer. Open' (CRS610/K) and activating it in the adjacent field, the rule is automatically applied when you select invoices to be included in the interest invoicing routine. If the payment reminder rule in 'Payment Reminder Rule. Open' (CRS465) specifies that interest should be calculated when creating a payment reminder, the interest rule connected to the customer is used for the calculation.

The interest rule is saved in the parameter table (CSYTAB).

Before you start

  • Payment terms must be defined in 'Payment Term. Open' (CRS075)
  • If VAT is to be calculated, VAT codes must be defined in 'VAT Code. Open' (CRS030).

Parameters to set

Program ID/Panel Field The field indicates …
(CRS460/E) Annual interest ... the annual interest specified as a percentage with two decimal places.
(CRS460/E)

Number of free days

... the number of days free of interest after the due date.

If the number of days is set at three, for example, invoices whose payments have been up to three days late will not be included in the interest invoicing routine, no matter how large the invoice amount. However, a payment received the fourth day will be included and interest will then be charged for all four days.

(CRS460/E)

Minimum amount per payment received

... the minimum interest amount before interest is charged for a specific late payment.

Invoices are listed in the proposal even if the interest amount is lower than the specified minimum amount. However, they are not included in the final interest invoice until the accumulated interest amount equals or exceeds the minimum amount.

(CRS460/E)

Minimum amount per interest invoice

... the minimum invoice amount required for an invoice to be included in the interest invoice proposal.
(CRS460/E)

Payment terms

... a set of payment terms. The payment terms control how the due date is calculated in relation to the invoice date.
(CRS460/E)

Invoice charge

... the interest charge to be debited to the customer.
(CRS460/E)

Interest invoicing method

... whether interest should be calculated only for invoices paid too late, or for both open invoices (past due as well as not past due) and invoices paid too late.

The value specified is proposed when creating an interest invoice proposal in 'Interest Invoice. Open' (ARS160) but can be changed.

(CRS460/E)

Grouping method

... whether one interest invoice should be produced per combination of payer and customer or one per payer.
(CRS460/E)

Interest credit invoice

... whether to calculate interest on credit invoices on the customer's behalf. The amount is then automatically deducted from the payment amount in the interest invoice.
(CRS460/E)

Include previous interest invoice

... whether to calculate interest on interest invoices, that is by including previously created interest invoices in the calculation. Note that this may not be legal in all countries.
(CRS460/E)

Calculation base

... the date from which interest is charged:

a) From the due date for invoices paid too late and open invoices past due

b) From the invoice date for both paid and unpaid past due invoices

c) From the invoice date for all invoices, even if they are not past due.

For more information, see Interest Invoicing.

(CRS460/E)

VAT code charge

... the VAT code to use for calculating VAT on invoice charges.
(CRS460/E)

VAT code

... the VAT code to use for calculating VAT on the total amount of the interest invoice.
(CRS460/E) Time fence … whether the parameter time fence should be considered when creating an interest invoice proposal.

The field indicates how many days after payment that a payment transaction can still be included in an interest invoicing proposal in (ARS160). The number of days is calculated from the payment date to the date of the interest invoicing proposal.

If there is a value in this field, any older payments will be excluded from the proposal. This functionality is only available when the field 'Int inv method' has been set to 1-'Invoices paid too late'.

Example:

If the time fence is set to 365 days, any late payment that was made 365 days ago, or earlier, will be excluded from the interest invoicing proposal.
(CRS460/E) Interest on invoice net amount … whether the parameter interest on invoice net amount should be considered when creating an interest invoice proposal in (ARS160).

Select the check box to calculate interest on invoice net amount in (ARS160). This means that the interest charge will be based on the net amount of goods or service excluding VAT. If the check box is not selected, the interest charge will be based on the invoice gross amount including VAT.

Example:

  • Invoice net amount = 10,000
  • VAT at 20% = 1,200
  • Invoice gross amount = 11,200.

Base amount for interest invoicing, for which interest is calculate:

  • If the parameter is enabled = 10,000
  • If the parameter is not enabled = 11,200.
Note: If the calculated interest amount is subject to VAT, a VAT code must be specified in the field 'VAT code - total interest inv amt' (VTC2) on (CRS460/E).

Follow these steps

  1. Start 'Interest Rule. Open' (CRS460/B).

  2. Specify three-position code or identity for the rule. Press New.

  3. On the E panel, specify a description and a name.

  4. Specify the required values: Annual interest, payment terms, interest invoicing method, grouping method, and calculation base.

  5. When needed, specify any of the other values described in the table above. Press Enter.

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