Examples of Using a Minimum Customer Balance with Late Charges

In situations where it isn't cost effective to calculate and collect late charges for small amounts, you can set a minimum customer balance for late charges.

You set a minimum customer balance per currency on the Credit Limits and Late Charges tab of the Create Receivables Customer Profile Class page, or on the applicable customer or customer site profile. Receivables only assesses late charges when the minimum balance of the applicable customers is exceeded.

These examples illustrate the difference between calculating the minimum customer balance using the Overdue Transactions Only charge calculation method and the Average Daily Balance charge calculation method. In these examples, the minimum customer balance is $250.

These examples also illustrate how submitting the Create Late Charges program on different dates (May 20 or May 30) can potentially change the activity selected for late charge calculation.

This table includes a time line of debits and credits to a customer account:

Date	Charge Type	Amount
April 10	Debit	$200
April 12	Debit	$200
May 4	Debit	$100
May 6	Credit	$50
May 13	Credit	$25
May 18	Credit	$200
May 24	Credit	$50
May 27	Debit	$100

In these examples:

• The billing date is May 1 and the billing cycle is from the first day of the month to the last day of month inclusive.

• The due date is the 10th of the following month.

• The receipt grace period is three days.

Create Late Charges on May 20: Overdue Transactions Only

The Overdue Transactions Only calculation method compares the minimum customer balance to the sum of all customer debit and credit activities as of the date when you run the Create Late Charges program.

If you submit the Create Late Charges program on May 20, then the customer balance includes 3 overdue invoices (April 10, April 12, and May 4) for a total of $500. The balance also includes 3 payments (May 6, May 13, and May18) for a total of $275.

The total customer balance is $225, which is below the minimum balance of $250. Therefore, late charges aren't calculated for this customer.

Create Late Charges on May 20: Average Daily Balance

The Average Daily Balance calculation method starts with the ending balance of the last balance forward bill, and subtracts all credits (receipts and credit memos) up through the due date plus receipt grace days to determine if the customer balance is eligible for late charges.

To calculate late charges, Receivables starts with the ending balance of the last balance forward bill and includes only invoices that were on the last bill. In this case, Receivables includes invoices that were created before May 1 (April 10 and April 12) for a total of $400.

Receivables then subtracts all credits that were recorded before May 13 (the due date plus receipt grace days). Credits include the receipts from May 6 and May 13 for a total of $75.

In this case, the total customer balance is $325, which is higher than the minimum balance of $250. Therefore, late charges are calculated for this customer, using the applicable Average Daily Balance calculation method.

Create Late Charges on May 30: Overdue Transactions Only

If you submit the Create Late Charges program on May 30, then the customer balance includes 4 overdue invoices (April 10, April 12, May 4, and May 27) for a total of $600. The balance also includes 4 payments (May 6, May 13, May 18, and May 24) for a total of $325.

The total customer balance is $275, which is higher than the minimum balance of $250. On this day, late charges are calculated for this customer.

Create Late Charges on May 30: Average Daily Balance

In this example, submitting the Create Late Charges program on May 30, as opposed to May 20, doesn't change the customer balance calculation.

To determine the customer balance, Receivables still starts with the ending balance of the last balance forward bill (May 1), and subtracts all credits (receipts and credit memos) up through the due date plus receipt grace days (May 13).