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Setting up a 'Daily Interest Pro-rata' late fee
Setting up a 'Daily Interest Pro-rata' late fee

Learn the best practices and how it works.

Denym avatar
Written by Denym
Updated over a week ago

This is used for those wanting to calculate a daily interest charge, pro-rated from a per annum charge.

This will take your interest rate and apply it to the outstanding balance. As this is per annum we then divide it by 365 to get a daily interest charge.
We then multiply the daily charge, by the number of overdue days (grace period) OR how many days since we last sent a penalty for this invoice.

For example:

  • $10,000 invoice

  • Daily P.A rate is set at 7.9%

  • Annualised this = $790

  • The invoice collects interest of = $790 / 365 days = $2.16 per day interest

  • If the invoice is 30 days overdue = 30 days x $2.16 per day = $64.80

Best practice:

The calculation of the overdue interest will only occur when the penalty is issued.

  • For this we recommend that you use New Invoice setting (to avoid compounding beyond the annualised amount)

  • To set a Grace Period, as if this is set to 0, there will be no interest to charge.

  • and to set Repeat Late Fee. For each period (example every 30 days) for the compounding of the fee to occur.

For reference we have followed guidelines set here: Gov UK

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