What are groups?

Your contacts can be added to a 'Group', you can also assign multiple policies to any group. This means that contact will have the late fee's configured in those policies processed against them.

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What is the Default group?
The 'Default' group means any contacts that don't appear in any other groups will be processed as if they are apart of the default group. This saves having to import every single Xero contact.
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When no policies are assigned to a group, members of that group will not have late fee's added.