Set Up Multiple Interest Rates for Delayed Payment
You can use different interest rates for different periods for delayed payments in trade transactions. For each finance charge term code, you can specify multiple interest rates so that you can calculate finance charges with multiple interest rates for a specific period. This is helpful if you charge different interest on payments that are late. The interest calculation is the same for each financial charge, with variation only in the rate of interest for a specific period. If multiple interest rates are not set up, then the interest rate and period that is defined in the Finance Charge Terms and Reminder Terms pages for the whole period of calculation will be used.
For example, a government specifies the maximum interest to be levied for a consumer. This interest rate can be changed twice a year on 01 January and 01 July. The interest rate between businesses (B2B) is agreed by the parties and there is no limit to that customer group. The announced rate is usually four percent more than the normal bank interest.
When you create finance charge terms and reminder terms, for delayed payment penalty, you can specify multiple interest rates so that the penalty fee is calculated from different interest rates in different periods.
To set up multiple interest rates
- Choose the icon, enter Finance Charge Terms, and then choose the related link.
- On the Finance Charge Terms page, select the required finance term, and then choose the Interest Rates action.
- Fill in the fields as necessary. Hover over a field to read a short description.
- Choose the OK button.
- Choose the icon, enter Reminder Terms, and then choose the related link.
- On the Reminder Terms page, select the required reminder term, and then choose the Levels action.
- On the Reminder Levels page, for the relevant reminder levels, select the Calculate Interest field.
When you issue a finance charge memo, the memo shows the finance charges with multiple interest rates for a specific time period. The memo also contains the contact details of the customer, the company issuing the memo, the additional amount, and the total amount. The opening entry on the memo is displayed in bold. The finance charges are calculated with multiple interest rates for a specific time period and are printed after the opening entry of the memo.