Late Charge Interest Calculation Methods

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

You select the calculation method in the Late Charge Calculation Method field 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 methods are:

• Average Daily Balance: Calculate late charges based on the average daily balance of overdue invoices. This method is for balance forward bills only.

• Late Payments Only: Calculate late charges based on the number of days between the payment due date and the actual payment date. This method uses the paid amount as the overdue invoice amount when calculating the late charge.

• Overdue Transactions Only: Calculate late charges for transactions based on the number of days a payment is late when you submit the Create Late Charges program.

• Overdue Transactions and Late Payments: Calculate late charges on both overdue transactions and late payments. This option levies the largest late charge amount on a customer.

  For example, your enterprise calculates late charges on the 15th and 30th of each month. Your customer has an overdue invoice of $100 that falls due on November 16:

  • On November 30, you run the Create Late Charges program. The program calculates late charges for this overdue invoice.

  • On December 10, your customer pays the invoice.

  • On December 15, you run the Create Late Charges program again. The program assesses further charges for the additional 10 days that the payment was overdue.