Finance Charge as a Percentage of the Overdue Amount
Set Finance Method to Per Period and enter the percentage in the Rate field. The finance charge is applied once an amount is overdue.
If the customer pays a partial amount after the grace period has elapsed, the finance charge is calculated against the original overdue amount.
If the customer pays a partial amount within the grace period, the finance charge is calculated against the original overdue amount minus the partial payment.
If minimum and/or maximum charges are set, the values may supercede the calculated charge, depending on the amount.
If a flat fee is specified, that amount is tacked on to the calculated percentage.
If a revenue-generating item is assigned to an invoice category designated as exempt from finance charges, the charge for that item is excluded from the finance charge calculation.
These examples illustrate each of the above scenarios. In each of these examples:
Billing occurs on the 20th of the month.
Payment is due the 1st of each month.
Grace Period = 5 days
Rate = 10%
Example 1 – Partial Payment After Grace Period:
Bill Period 1
Previous total amount due = $50.00
Partial payment applied on the 6th = $20.00
Balance= $30.00
Amount due after late fee calculated:
Late fee = $50.00 * 10% = $5.00
Total amount due = $35.00
Bill Period 2
Previous total amount due = $35.00
Partial payment applied = $30.00 on the 6th
Balance= $5.00
Amount due after late fee computed:
Late fee = $35.00 * 10% = $3.50
Total amount due = $8.50
Bill Period 3
Previous total amount due = $8.50
Full payment applied on the 2nd = $8.50
Balance= $0.00
Amount due after late fee computed:
Late fee = $0 * 10% = $0.00
Total amount due = $0.00
Example 2 – Partial Payment Within Grace Period:
Bill Period 1
Previous total amount due = $50.00
Partial payment applied on the 4th = $20.00
Balance= $30.00
Amount due after late fee computed:
Late fee = $30.00 * 10% = $3.00
Total amount due = $33.00
Bill Period 2
Previous total amount due = $33.00
Full payment applied on the 2nd = $33.00
Balance= $0.00
Amount due after late fee computed:
Late fee = $0 * 10% = $0.00
Total amount due = $0.00
Example 3 – Flat Fee in Addition to Rate & Minimum & Maximum Charges Apply:
Flat Fee = $12
Minimum Charge = $15
Maximum Charge = $25
Bill Period 1
Previous total amount due = $200.00
No partial payment
Balance= $200.00
Amount due after late fee computed:
Calculated late fee = $200.00 * 10% + $12 = $32.00
Actual late fee = $25 (Maximum Charge)
Total amount due = $225.00
Bill Period 2
Previous total amount due = $225.00
Partial payment applied = $200.00 on the 3rd
Balance= $25.00
Amount due after late fee computed:
Calculated late fee = $25.00 * 10% + $12 = $14.50
Actual late fee = $15 (Minimum Charge)
Total amount due = $40.00
Example 4 – Charges exempt from finance charges through invoice category
In this example, invoice category A is designated as finance charge exempt in the account’s finance group detail configuration, and product X is assigned to invoice category A.
Bill Period 1
Previous total amount due = $50.00
Charge for product X = $10.00
Partial payment applied on the 6th = $20.00
Balance= $30.00 + $10.00 = $40.00
Amount due after late fee computed:
Late fee = ($40.00 - $10.00) * 10% = $3.00
Total amount due = $43.00
Exempting Certain Customers from Late Fees on Overdue Amounts Paid by Next Due Date
As covered earlier, this may apply when your system is configured to charge late fees in this scenario via the Enable Finance Charges for Paid-Off Overdue Invoice setting in Admin Console Business Rules.
Set Finance Method to Per Period Next Due Date and enter the percentage in the Rate field. This method uses the same formula as Per Period, except that the finance charge is applied only on that portion of the past due balance not paid by the next due date.
Example:
Billing occurs on the 20th of the month.
Payment is due the 1st of each month.
Grace Period = 5 days
Rate = 10%
Bill Period 1
Balance= $50.00
Amount due after late fee computed:
Late fee = $50.00 * 10% = $5.00
Total amount due = $55.00
Bill Period 2
Previous total amount due = $55.00
Partial payment applied on the 3rd = $25.00
Balance= $30.00
Amount due after late fee computed:
Late fee = $30.00 * 10% = $3.00
Total amount due = $33.00
Bill Period 3
Previous total amount due = $33.00
Full payment of balance prior to late fee assessment of $30.00 applied on the 3rd.
Finance charge of $3.00 waived
Balance= $0.00
Flat Fee
Set Finance Method to Flat Fee and enter the amount in the Fee field.
Example:
Billing occurs on the 20th of the month.
Payment is due the 1st of each month.
Grace period = 5 Days
Fee = $15
Bill Period 1
Total amount due = $50.00
Payment #1 made on the 7th = $20.00
Balance = $30.00
Late fee = $15.00
Payment #2 made on the 18th = $30.00
Balance = $0.00
Late fee = $15.00
Bill Period 2
New charges = $45.00
Total amount due = new charges + $15.00 finance charge = $60.00
Payment made on the 4th = $60.00
Balance = $00.00
Late fee = $00.00
Excluding Previous Finance Charges in a new Calculation
Set up a Finance Charge invoice category for this purpose as described in Set Up - Finance Group Details – Exclude Charges From Late Fees By Invoice Category.
Bill Period 1
Previous total amount due = $200.00
No partial payment
Amount due after late fee computed:
Late fee = $200.00 * 10% = $20.00
Total amount due = $220.00
Bill Period 2
Previous total amount due = $220.00
Partial payment applied = $100.00 on the 3rd
Balance= $120.00
Amount due after late fee computed:
Late fee = ($120.00 - $20 finance charge from previous bill period) * 10% = $10.00
Total amount due = $130.00