Finance Charges
Before Calculating Finance Charges for past due balances, you will need to set up a few supporting items:
- A GL Account for Finance Charges collected will need to be added to the Chart of Accounts.
- Some data will need to be entered in System Setup: A/R & A/P
- Determine which Clients will have Finance Charges applied.
1. Set Up a GL Account for Finance Charges.
See the lesson for details on how to Set Up a GL Account.
2. System Setup: A/R & A/P tab
Navigate to Administration -> System Setup -> A/R & A/P:
- Enter the Finance Charges GL Account that was created in Step #1.
- This GL Account will be CREDITED when Finance Charges are calculated.
- Enter the Finance Charge rate (% per Month).
- This is the rate that is charged for past due balances when Finance Charges are calculated (only if the Client is set to receive a Finance Charge).
- Enter the Minimum Charge.
- This charge is the minimum Finance Charge that will be calculated. If the % per Month yields a charge less than this amount, this Minimum Charge will be applied instead of the percentage.
3. Enable a Client to have Finance Charges applied.
Finance Charges will only be calculated on past due balances for Clients who have the Finance Charge box checked on their Client record.
- Open a Client record and go to the Account Information tab.
- Check the box here if Finance Charges are to be calculated for past due balances for this Client.
- Click OK to save the record when finished.
4. Calculate Finance Charges
- Finance charges are calculated during the Post Transactions process through the General Ledger module.
- Select the After Posting Option labeled Finance Charges.
- AcctVantage will calculate Finance Charges on all past due balances for those Clients who have been enabled to receive Finance Charges.
4.1. Enter cut off date for finance charges.
- When the Finance Charges box is checked, AcctVantage will prompt for a cut off date.
- Finance charges will be calculated for past due balances that fall between the most recent finance charge cut off date and this current cut off date.
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4.2. Are you sure you want to run Finance Charges with this posting session?
- When Proceed button on the Posting window is clicked, AcctVantage will confirm that Finance Charges should be calculated during the current posting session.
- If No is clicked the posting session will be canceled.
- If Yes is clicked the posting session will continue and Finance Charges will be calculated.
- After Finance Charges are calculated they will appear as non-posted Journal Entries.
- The resulting Journal Entry applies a DEBIT to the Client’s Accounts Receivable Sub Account and a CREDIT to the Finance Charges GL Account.
- Finance Charges will not affect the General Ledger or the Client’s AR Sub Account until the Journal Entry is posted.
- After the Journal Entry is posted, the Finance Charge will appear as another AR Aging item on the Client’s AR Sub Account.
- The item will be included on the Client AR Statement and is subject to incur Finance Charges of its own.
- The resulting Journal Entry applies a DEBIT to the Client’s Accounts Receivable Sub Account and a CREDIT to the Finance Charges GL Account.
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