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Finance Charge Terms

The Finance Charge Conditions code list is used to record possible ways of penalizing the contract, from which the user selects the method when creating a customer card and a financing contract.

The availability of the code list is via a magnifying glass or the Configuration Booklet. After confirming the selection, the dial will open.

A new record can be created via the button New on the Action Pane, or directly by clicking in a new row. When you press the Edit button, the Finance Charge Terms Card opens, making it easier to edit the definition:

Field:

  • Code

    • It represents a unique code that the user enters manually. The code can be numeric, text, or a combination of numbers and text without spaces (can be replaced by an underscore) with a maximum length of 10 characters. We recommend creating it in such a way that it is easy to remember and helps the user identify what the penalty is by looking at the code

  • Description

    • Short text description/name of the penalty method

  • Line Description

    • The user can enter a description to use in the field Description in finance charge lines. The following built-in variables are available:

      • %1 = Customer Item Description

      • %2 = Customer Entry Document Type

      • %3 = Customer Entry Document No.

      • %4 = Finance Charge Rate

      • %5 = Customer Entry Amount

      • %6 = Base amount (from which finance charge charges are calculated)

      • %7 = due date of customer item

      • %8 = Currency code for the finance charge header

    • If a user defines a text that contains one of the above variables, the system automatically swaps the code with the corresponding text

  • Detail Line Description

    • Specifies the description to use in the Description field on finance charge lines if multiple interest rates are set for different payment delay periods and the description must show the sum of these values

  • Minimum Amount (LCY) Minimum Amount (LCY)

    • Minimum finance charge amount in local currency. After you run the Create Finance Charge Memo batch job, or Suggest Finance Charge Lines, the program calculates the finance charge that should be added. If the finance charge that the program calculates is less than the amount that is specified in the field Minimum Amount (LCY), then no amount will be added

  • Fee (LCY) (Additional Fee (LCY)

    • The amount of the fee in local currency that the system can automatically add to the finance charge memo when interest is calculated. For each finance charge terms code, it is also possible to define additional fees in foreign currencies for all currencies that the leasing company works with, in the currency table for finance charge terms, via Related > Currency > Terms (described in Chap. Currencies for finance charge terms) 

  • Interest Rate

    • Percentage rate for calculating finance charge for this finance charge code

  • Interest Calculation

    • Definition of which items should be penalized for a given penalty method. Withdrawal options:

      • All Entries – Closed and Open Entries

      • Closed entries – items in arrears that have already been paid as of the penalty date

      • Open items – items in arrears that have not been paid as of the penalty date

  • Interest Calculation Method

    • The user selects the calculation method for this set of finance charge terms. Multiple choices:

      • Payable balance – the finance charge is a percentage of the remaining amount

        • Finance Charge = (Balance Payable * Interest Rate) / 100

        • ENG: Balance Due: Finance Charge = Overdue Amount x (Interest Rate / 100)

      • Average Daily Balance – It takes into account the circumstance of how many days the relevant payment is already overdue. It is a progressive method that takes into account the number of days overdue:

        • Finance Charge = Remaining Amount* (Days Overdue / Finance Charge Period) * (Interest Rate/100)

        • ENG: Average Daily Balance: Finance Charge = Overdue Amount x (Days Overdue / Interest Period) x (Interest Rate/100)

    • If the average balance method is selected, the interest period that is used in the field must be entered Finance Charge Period (days).

  • Interest Period (Days)

    • The user manually enters the number of days in the period in which the finance charge rate is to be applied

    • The field is REQUIRED if the selected finance charge calculation method is Average Daily Balance

    • If a daily rate is entered, the finance charge period is 1 (see image above: 1.5% is the daily rate, the period is then 1)

  • Due Date Calculation

    • A user manually enters a date formula to calculate the due date of a finance charge invoice. The due date is calculated from the date of the finance charge document

    • E.g. the formula 14D will be for the due date 14 days after the due date of the invoice for the finance charge payment, 1M for 1 month, etc.

  • Grace Period

    • In this field, the user enters a date formula that determines the number of days after the due date of the item, during which the system will not penalize the client for late payment. The deadline for the first finance charge is calculated from the due date of the due invoices. The deadline for the next finance charge is calculated from the due dates of the previous finance charge memos

    • Example 1: the due date of the customer item is 1.11.2022, it is set Grace Period = 5D. We are launching the penalty on 4.11.2022 - > finance charge will not be created for the item. If the customer does not pay for the item and the method Calculation of Finance Charge = Open Items or All Items is used, at the next penalty, e.g. 4.12.2022, a finance charge will be created for the entire period from 1.11.2022 to the penalty date 4.12.2022)

    • Example 2: If the customer paid an item, e.g. on 5.11.2022, a penalty will not be created at the next penalty (the payment was made between 1.11.2022 + 5D – it is assumed that the payment was made on time). For example, if the customer paid for the item on 10.11.2022, a penalty will be created for the entire delay period (from 1.11. to 10.11.2022) at the next penalty

    • E.g. formula 5D will be for deferral 5 days after the due date of the item invoice

  • Post Interest

    • Flag that specifies whether or not the finance charge should be posted to the customer's accounts and account when the finance charge memo is issued.

  • Post Additional Fee

    • Flag that specifies whether or not the additional fee should be posted to the customer's accounts and account when the finance charge is issued.

  • Add. Line Fee in Interest

    • If this flag is not Yes and calculates finance charge for a customer entry of the reminder type, then the calculated finance charge amount is reduced by some amount from the reminder

    • It is not used in leasing.