Before you can set up interest invoice information for a customer, you must check that the Interest Invoice profile is set to Yes.
To set up a customer to use Interest Invoice, you must enter additional information in the customer’s profile. Interest Invoice information can be assigned to a customer or a customer site. If a customer site has a profile assigned to it, you must enter the Interest Invoice information against each customer site. If you have only set up profile information at customer level, you can enter Interest Invoice information at the customer level.
To enter the Interest Invoice information:
1. Navigate to the Additional Profile Information region in the Maintain Customer Profiles window (Oracle Receivables Responsibility: Customers > Standard).
At the bottom of the region, the interest invoice flexfield will pop open and allow you to enter the interest invoice information.
Note: The flexfield will only open if you have set up your Interest Invoice profile.
2. Navigate to the Amount Limits For Each Currency region.
The Cust. Profile Amount Int Inv Info flexfield opens.
3. Enter the interest invoice information in the Cust. Profile Amount Int Inv Info flexfield.
Interest Invoice - You can set this field to either Yes or No to indicate whether the customer or customer site is liable for interest invoices. Interest invoices are created for the customer/customer site only if this field is set to Yes.
Transaction Type - The value that you enter in this field determines which transactions Interest Invoice will calculate interest on. The values are:
— Late Payments and Overdue Invoices - Interest Invoice will calculate interest on any invoices that are overdue, and on any payments that were received late.
— Late Payments Only - Interest Invoice will calculate interest on late payments.
— Overdue Invoices Only - Interest Invoice will calculate interest on overdue invoices.
The different calculation methods produce the same interest charges, although the main differences between the methods is when you receive the interest from the customers. With Overdue Invoices Only, you are charging customers interest on the outstanding amount of the invoice. You do not have to wait for any payments from the customer before you charge them interest on overdue invoices.
When you use the Late Payments Only method, you will charge the customer interest when you actually receive the late payments from the customer. If you use the Late Payments And Overdue Invoices method, you will receive interest from the customer sooner than if you used Late Payments Only because you are charging the customer on both the payments you receive from them, and the outstanding balance of the overdue invoice.
Interest Invoice Text - Select any messages that you want to print on your Interest Invoice Final Report before you send it to your customer.
Hold Charged Invoices - This field controls whether an overdue invoice appears on more than one interest invoice. The default is No. If you set the field to Yes, an overdue invoice is not liable for any further interest invoice charges once interest has been calculated on it.
Effective Date - This field specifies the date that a customer becomes liable for interest invoices. Late payments or overdue invoices with a due date prior to the effective date are not taken into consideration when calculating interest.
You must define interest invoice information at currency level in order to create interest invoices. If you do not define any interest invoice information against a currency then no interest invoices is created for that currency.
4. Navigate to the Amount Limits For Each Currency region. A flexfield opens where you enter the interest invoice information.
5. Enter the invoice interest information:
Fixed Fee - This is a fixed fee that is applied to each interest invoice created.
Minimum Amount - The minimum balance an interest invoice must reach before it is created. You can set this field to a value that will ensure that you do not raise uneconomical interest invoices.
Minimum Payment Amount - Enter the minimum amount an overdue or late payment must be before it is included in the calculation process for Interest Invoice. This field allows you to stop Interest Invoice charging interest on small invoices and payments.
Exchange Rate Type - The exchange rate type that is defaulted to the interest invoice.
Exchange Rate - The exchange rate that is defaulted to the interest invoice if the exchange rate type is User. If the exchange rate type is not User, the exchange rate information is set according to the exchange rates that are defined in the Define Daily Rates window.
Calculation Method - The calculation method used by Interest Invoice to calculate the interest. The options available are:
— Daily Interest - calculated for each day that the payment or invoice is late.
— Monthly Interest - calculated for each month that the payment or invoice is late.
If you choose a calculation method of Daily, you are choosing to calculate interest for each day that an invoice is overdue, or for each day that a payment is late. The calculation method depends upon how many days you entered in the Days In Period field in the Additional Profile Information region. In this example, we will assume a value of 365 days. Assuming you have defined an interest rate of 12.5% and that you have entered 365 in the Days In Period field, then an invoice for $1,000 that is 35 days late will result in the following calculation:
(12.5% / 365 days) x35 days x $1,000
= (0.125 / 365) x 35 x 1,000
If you choose a calculation method of Monthly, you are choosing to calculate interest for each month that an invoice or payment covers. The calculation method also relies on the number you enter in the Days In Period field in the Additional Profile Information region. In this example we will assume a value of 365 days.
If you have an invoice for $1,000 due on 15-Sept-1996, and you run Interest Invoice on 15-Oct.-1996, Interest Invoice will calculate the invoice as being overdue by 60 days. The 60 days comes from 30 days in September and the 30 days in October. Therefore, the calculation for the interest on the invoice would be:
(12.5% / 365 days) x 60 days x $1,000
= (0.125 / 365) x 60 x 1,000
Daily Rates - If you are using the Daily Calculation Method, you must specify the lookup code used to determine the interest invoice interest rate.
Monthly Rates - If you are using the Monthly Calculation Method, you must specify the lookup code used to determine the interest invoice interest rate.