How Interest and Penalties Impact Collection Documents?

In Brazil, you can calculate the interest for late payments on invoices. Interest is calculated based on the amount or rate within an interest period. In addition, penalties can be applied in the form of an amount or based on a rate whenever a late payment is made.

• All nonbusiness days (national and city holidays, plus weekends) are considered for determining the due date for payments. User-defined controls are required to anticipate, postpone, or keep a due date based on nonbusiness days for interest calculation.
• Grace days are allowed whereby interest is not charged for a number of days after the due date.
• Both simple and compound interest calculations are supported for rate-based interest.

Interest control parameters, such as interest rate, grace days and interest period, are configured at the customer profile class level and these details default in the installments for transactions. Nonbusiness days that are defined in calendars are used to help determine the payment due dates. Interest can be based on either the total amount of the invoice or a partial payment.

For receipts, Receivables determines the difference between the calculated interest and the received interest. If the calculated interest is greater than the received interest, then the difference can either be written off or a debit memo can be generated.

Debit memos are created for the difference between received interest versus calculated interest, which are beyond the tolerance.

Interest adjustments are automatically created for the received interest.

Interest write-off adjustments are automatically created for the difference between received interest versus calculated interest, that are within the tolerance.