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Statement Interest Charges
Statement Interest Charges

How to set up statement based interest charges and fees, and how its calculated.

Jack Daffron avatar
Written by Jack Daffron
Updated over a week ago

How do I configure a statement or contact based interest charge?

You will need to create a new statement interest charge policy:

Calculation Method - Percentage: A flat percent to each invoice overdue balance will be applied, regardless of overdue duration. E.g $100 overdue will incur a $10 charge if this is set to 10%.

Calculation Method - Interest Rate Per Annum: Each invoice overdue balance as this interest rate applied, and then is prorated per day it was overdue. So if a $2000 invoice was overdue for 100 days. Then the maths would be: ($2000 x 0.1 = $200) / 365 = $0.55 per day. (So $55 for the 100 days overdue)

Important: These calculations are made at a per invoice level, not the entire balance.

Fixed Amount: This is an optional fixed admin/management fee you may wish to add, set to 0 to not add any fixed fee.

Minimum & Maximum Overdue Debt Age: This is how many days overdue which should include in the calculation. Used to filter out invoices, to allow time for bank deposits to clear and reconciliation. If the minimum is set to 7, and an invoice is 10 days overdue, then the prorated calculated will be for the full 10 days.

Frequency: This can be monthly or weekly, around midday organisation time. If monthly and the day does not exist (E.g Feb 31st) then the first of the next month will be used.

Adjust for credit: If a customer has any unallocated credit notes, perform the same calculation as above but in reverse to bring the interest charge back down.

If you need help with any of the other fields, please don't hesitate to reach out.

Selecting which invoices to include

This option allows you to decide which invoices to include when calculating interest or late fees. The option to include overdue invoices, or overdue and outstanding is which invoices will be applied for the fee.

So if you take an example of a customer with 3 unpaid invoices:

Invoice 1 - $100 due 3 days ago

Invoice 2 - $100 due in 3 days
Invoice 3 - $100 due 7 days ago

If we only look at overdue invoices for the interest calculation then only invoices #1 and #3 would have interest applied.

However if we looked at all unpaid invoices (both overdue and outstanding) then we'd apply interest to all 3 unpaid invoices.

The second option is more suited to businesses where customers maintain an account balance and pay interest or penalties on all unpaid amounts (consider the balance like a loan).

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