Late Charge Interest Calculation Formulas

When you set up a late charge profile for your customers, you must decide the formula to use to calculate late charges.

You select the calculation formula in the Interest Calculation Formula field in the Charge Calculation Setup section in the Credit Limits and Late Charges tab of the Customer Profile Class pages, or on the applicable customer or customer site profile.

The interest calculation formulas are:

• Flat Rate: Use a flat rate to calculate the late charge amount. Receivables ignores the number of days that a payment is overdue. If you use balance forward billing and the average daily balance calculation method, then this is the calculation formula used. The formula is:

  Amount Overdue * (Interest Rate/100)

• Simple: Calculate late charges on overdue transactions only. If you use interest tiers and charge schedules to create late charges and penalties, then this is the calculation formula used. The formula is:

  Amount Overdue * (Interest Rate/100) * (Number of Days Late/Number of Days in Period)

• Compound: Calculate late charges on the sum of overdue transactions and prior late charges. The formula is:

  (Amount Overdue + Prior Late Charges) * (Interest Rate/100) * (Number of Days Late/Number of Days in Period)