Finance Charges Setup

Overview

The setup in the Define Finance Charge Types and Define Finance Charge Groups windows are used in assigning and accruing finance charges in receivables management. In the Define Finance Charge Types window, enter finance charge types. In the Define Finance Charge Groups window, enter finance charge basis and finance charges to be assessed to each basis for a particular finance charge group.

Related Topics

Receivables Management Procedures, Oracle U.S. Federal Financials User Guide

Prerequisites

Before setting up finance charges, you must:

Related Topics

Oracle U.S. Federal Financials Setup Overview

Define Transaction Types

Define Lookups

Oracle Applications Multiple Organizations Support, Multiple Organizations in Oracle Applications

Defining Finance Charge Types

To define finance charges type used by the organization, navigate to the Define Finance Charge Types window.

The following table describes selected fields on the Define Finance Charge Types window.

Define Finance Charge Types Window Description
Field Name DESCRIPTION
Operating Unit Operating unit of the record.

Note: The list of values include operating units assigned to the MO: Security profile.
Charge Type Charge type name to be defined
Enabled Indicates charge type in use

Note: When disabled, it prevents new charges from being assigned as well as stops accrual of existing invoices assigned that charge.
Invoice Suffix Last digits of invoice number; used at end of debit memo number created for that finance charge type
Description Charge type description
Category Categorizes each user-defined finance charge as additional interest, administrative cost, or penalty
Grace Period Additional days before first accrual
Priority Order of payment among charge types when cash received; lowest priority charge types paid first; must be greater than zero
First Accrual Days beyond due date; must be greater than zero
Accrual Interval Days between accruals; must be greater than or equal to zero. Zero signifies a one-time charge.
Accrue At Installment If selected, indicates each installment of a split term transaction will have finance charges assessed
Transaction Type Debit memo transaction type assigned to the charge type
Batch Source Name Batch source name
Base Date The date used as the basis for accrual calculation

Note: Options include invoice date and invoice due date.
Prorate At Permits proration of finance charges using the accounting distribution from the document being charged.

Note: Options include none, distribution only, and line and distribution.
Rate Type Allows the selection of the Current Value of Funds Rate (CVFR) from the Define Fund Rates window to be used for calculation purposes.
Rate Base Indicates how the Rate % charges will be assessed.

Note: Annual indicates the % will be assessed on an annualized basis. Flat indicates the % will be assessed directly. When CVFR is selected as Rate Type, this field must be Annual.
Rate % Percentage; Not Allowed If Amount Entered; Must Be Greater Than Zero

Note: When CVFR is selected as Rate Type, this field is unavailable for entry.
Amount Amount; Not Allowed If Rate % Entered; Must Be Greater Than Zero
Start Date Date charge effective; must be later than last start date for that charge type
Rate Type Indicates whether the Current Value of Funds Rate (CVFR) from the Define Fund Rates window will be used for calculation purposes; can be updated if end date is blank.
Rate Base Indicates how the Rate % charges will be assessed; can be updated if end date is blank

Note: Annual indicates the % will be assessed on an annualized basis. Flat indicates the % will be assessed directly. When CVFR is selected as Rate Type, this field must be Annual.
Rate % Percentage; can be updated if end date is blank

Note: When CVFR is selected as Rate Type, this field is unavailable for entry.
Amount Amount; can be updated if end date is blank
Accrual Type Accrual method
Frequency How often accrued
Start Date Date charge effective
End Date Date charge ended

Defining Finance Charge Groups

To define finance charges type used by the organization, navigate to the Define Finance Charge Groups window.

The following table describes selected fields on the Define Finance Charge Groups window.

Define Finance Charge Groups Window Description
Field Name Description
Operating Unit Operating unit of the record.

Note: The list of values includes operating units assigned to the MO: Security profile.
Charge Group Charge Group name to be defined
Finance Charge Basis Basis the finance charge type will be assessed against; indicates whether the finance charge type will be assessed against principal amounts or other finance charge types.
Finance Charge Assessed Finance charge type.
Start Date Date charge effective
End Date Date charge ended.
Assign Customer Class Opens the Assign Customer Class to Charge Groups window.

The following table describes selected fields on the Assign Customer Class to Charge Groups window.

Assign Customer Class to Charge Groups window Description
Field Name Description
Operating Unit Operating unit of the record.
Charge Group Charge Group name
Customer Class Receivables Customer Class
Enabled Indicates Customers assigned to the customer class will be assessed the finance charge types for the charge group.

Example of Finance Charge Group

In the Define Finance Charge Types window, assume the following finance charge types have been defined:

In the Define Finance Charge Groups window, a charge group is defined as:

Finance Charge Basis Finance Charged Assessed
Principal Interest
Principal Penalty
Interest Interest
Penalty Interest

In this example, the following charges would be assessed: