Applying interest

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Applying interest on Invoices and Receivables Statements and how to post interest receipts.

 

When you print invoices or statements of account, you can choose to show interest. Please note that an interest charge is not actually posted to their account when you show interest on an invoice. You have to post an interest invoice separately. Generally, you should not make the actual interest posting until you receipt the payment from the client.

When you receive the payment from the client with interest, you make a single A/R invoice posting for the interest amount.

Scenario 1: - Payment in full

File ABC has an outstanding invoice for $100. It is overdue and you send them a statement showing the invoice for $100 plus $5 in interest.

ABC sends you a check for $105.

 

You go to the A/R module and enter an A/R invoice for $5.

You then take an A/R receipt for $105 and apply it to the original invoice for $100 and the second invoice for $5.


Scenario 2: - An interest only payment

 File ABC has an outstanding invoice for $200. It is overdue and you send them a statement showing the invoice for $200 plus $8 in interest.

 ABC sends you a check for $8.00 (interest only).

 

You go to the A/R module and enter an A/R invoice for $8.

You then take an A/R receipt for $8 and apply it against the interest invoice you just posted. The original invoice for $200 remains outstanding and continues to age.


Scenario #3: - A partial payment that covers all interest and original invoice

 

 

File ABC has an outstanding invoice for $300. It is overdue and you send them a statement showing the invoice for $300 plus $12 in interest.

 ABC sends you a check for $50. You wish to apply $12 to interest and the remaining $38 to the original invoice.

 

You go to the A/R module and enter an A/R invoice for $12.

You then take an A/R receipt for $50 and apply it against the interest invoice and the remaining balance against the original invoice. $262 of the original invoice will remain outstanding.

Here is an example of what that receipt might look like. Not the A/R Disbursement area where the original invoice and the interest invoice have been selected. The Amount field on the original invoice has been overwritten to the partial payment amount.


Scenario 4: - A partial payment that only covers part of the outstanding interest.

If a client has only made partial payment that covers part of the outstanding interest you need to enter "Interest" in the Reference line on the Interest invoice. This will insure that the remaining outstanding interest will not be compounded.


 

 

 File ABC has an outstanding invoice for $400. It is overdue and you send them a statement showing the invoice for $400 plus $20 in interest.

 ABC sends you a check for $15. You wish to apply $15 to interest.

 

You go to the A/R module and enter an A/R invoice for $20. In the Reference line of the invoice you enter "Interest"

You then take an A/R receipt for $15 and apply it against the interest invoice. You make sure to change the amount field at the top and in the A/R disbursement area to $15. The original invoice for $400 and $5 of the interest invoice will remain outstanding. The interest invoice will not be factored into the future interest calculations.

Further info on posting A/R receipts in general can be found here: A/R Help


 

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