This topic describes the process of charging interest, after you set up interest profiles.
Accounts Receivable allows you great flexibility in charging interest. In a single interest batch you can charge interest to all your customers using the method, overdue period, and rate specified for each customer.
You can charge your open-item customers interest on individual overdue invoices and debit notes or on overdue account balances. (Balance-forward customers are automatically charged interest on the account balance.)
You can round up interest charges to a minimum amount and you can compound the charges (that is, charge interest on previous interest charges).
For more detailed information on how Accounts Receivable calculates interest, see About Calculating Interest Charges.
You set all interest options when you define interest profiles. For more information, see A/R Interest Profiles Screen.
If you use multicurrency accounting, you can specify a minimum interest charge and annual interest rate for every currency used in your Accounts Receivable system.
When you are ready to charge interest, you use the A/R Create Interest Batch screen to create batches of interest invoices.
You can select accounts to charge by customer number, customer group, national account, and billing cycle, and you can have as many open interest batches as you need at any time.
For more information, see A/R Create Interest Batch Screen and Creating Interest Batches Automatically.
Each interest batch contains one interest invoice for each selected customer with an overdue balance or transaction.
An interest invoice includes one summary detail that shows the amount charged and the number of the general ledger revenue account to which you post interest income. You can edit the detail to enter a comment you want to print with the detail on statements for the customer, or make other changes you need.
The invoice description displays the total overdue balance on which the interest charge was calculated, and the batch description lists the type and range of records you specified for selecting customers to charge. You can change both descriptions. You can also change the amount of the interest charge.
You can generate interest batches that include optional fields defined for invoices and invoice details on the A/R Optional Fields screen.
The program includes the following optional fields on the interest invoices you generate using the A/R Create Interest Batch screen:
If you charge interest to a customer who was issued a multiple-payment invoice (using a payment schedule), interest is calculated only on overdue payments. However, only one interest charge is calculated for the customer account, regardless of the number of overdue payments.
Each new interest batch uses the number of the next available invoice batch. It also assigns document numbers to the invoices using the prefix and beginning with the next number specified for interest invoices on the A/R Options screen.
Although you can have as many open interest batches as you want at a time, you may want to post each interest batch as you create it. This is particularly important if you create other interest batches using ranges of records that could include the same customers more than once.
When you post the interest batch, Accounts Receivable creates a posting journal of the transactions and updates the customer accounts.