Guidelines for Presenting Late Charges

During your late charges setup, you must decide how to record and present late charges to your customers.

You can record and present late charges as one of three documents:

• Adjustments

• Debit Memos

• Interest Invoices

You must complete the entire setup for late charges along with creating your late charge document. The sections below describe the specific steps you must complete for each late charge document that you intend to use.

Caution: The Create Late Charges process only assesses late charges on transactions belonging to customers with a positive open balance. The process doesn't assess late charges on customers with a zero or negative balance, and doesn't recognize advance payments or guarantees from customers against transactions when there is no positive open balance.

Adjustments

If you record late charges as adjustments, then Receivables combines all interest charges relating to an overdue transaction, and creates a single late charge adjustment against that transaction.

Note: You can't record late charges as adjustments for bills receivable transactions. You can only record late charges for bills receivable as debit memos or interest invoices.

If you also assess penalty charges, then Receivables creates two adjustments.

If you select Credit Items in the Charge Reductions field of the applicable customer profile, then credit items belonging to the customer reduce the outstanding overdue amount during late charge calculations.

You must complete these steps to record late charges as adjustments:

1. Select Adjustment in the Late Charge Type field on the Credit Limits and Late Charges tab of the applicable customer profile.

2. Define a Late Charges receivables activity and enter an activity GL account.

3. If you assess penalties in addition to late charges, then define a separate Late Charges receivables activity for Penalties and enter an activity GL account. Receivables creates penalties as a separate adjustment against the overdue transaction.

4. Assign these activities to Billing and Revenue system options:

   • Select the receivables activity for late charges in the Interest Charge Activity field in the Late Charges section.

   • Select the receivables activity for penalties in the Penalty Charge Activity field in the Late Charges section.

Debit Memos

If you record late charges as debit memos, then Receivables creates one debit memo per overdue transaction.

If you also assess penalty charges, then Receivables includes a separate line for penalty charges on the debit memo.

If you select Credit Items in the Charge Reductions field of the applicable customer profile, then credit items belonging to the customer reduce the outstanding overdue amount during late charge calculations.

Note: Because a debit memo is a standard transaction, tax may also be calculated on the debit memo transaction amounts.

You must complete these steps to record late charges as debit memos:

1. Select Debit Memo in the Late Charge Type field on the Credit Limits and Late Charges tab of the applicable customer profile.

2. Define a transaction source for late charges with a type of Imported. Receivables creates a debit memo batch using the Invoice API.

3. Define a transaction type for late charges:

   • Select a class of Debit Memo.

   • Specify the receivable and revenue accounts for this transaction type. Receivables uses these accounts instead of AutoAccounting when generating late charges.

4. Assign the transaction source and transaction type to Billing and Revenue system options:

   • Select the debit memo transaction type in the Debit Memo Charge Transaction Type field in the Late Charges section.

   • Select the debit memo transaction source in the Late Charge Transaction Source field in the Late Charges section.

5. Select payment terms for the applicable customer profiles to indicate the debit memo due date.

Interest Invoices

If you record late charges as interest invoices, then Receivables creates a single interest invoice per customer site and currency. The interest invoice consolidates and itemizes charges for a period, and includes details about charges for each overdue transaction.

If you also assess penalty charges, then Receivables includes a separate line for penalty charges on the invoice.

If you select Credit Items in the Charge Reductions field of the applicable customer profile, then Receivables calculates negative charges on existing credit items belonging to the customer, and includes these negative charges as lines on the interest invoice.

Note: Because an interest invoice is a standard transaction, tax may also be calculated on the interest invoice transaction amounts.

You must complete these steps to record late charges as interest invoices:

1. Select Invoice in the Late Charge Type field on the Credit Limits and Late Charges tab of the applicable customer profile.

2. Define a transaction source for late charges with a type of Imported. Receivables creates an interest invoice batch using the Invoice API.

3. Define a transaction type for late charges:

   • Select a class of Invoice.

   • Specify the receivable and revenue accounts for this transaction type. Receivables uses these accounts instead of AutoAccounting when generating late charges.

4. Assign the transaction source and transaction type to Billing and Revenue system options:

   • Select the interest invoice transaction type in the Interest Invoice Transaction Type field in the Late Charges section.

   • Select the interest invoice transaction source in the Late Charge Transaction Source field in the Late Charges section.

5. If you use interest tiers and charge schedules to assess increasingly higher late charges the longer a payment is overdue, you can set the Use multiple interest rates option on the related profile class, or on an individual customer or customer account profile.

   If you set this option, then if the effective dates for two charge schedules occur within a charge calculation period, both rates apply to late charge calculations during that period.

6. Select payment terms for the applicable customer profiles to indicate the interest invoice due date.