Task 04 - Finance Charges

NOTE: Customers need to be set to allow finance charges. Go to:

Customer Master (Task 17)
- Change Existing Customer Record (Sub-task 2)
  - Finance Charge: Y/N (field 23)
    - The system will only consider invoices up to the invoice cut-off date that haven't been paid by the payment cut-off date.
    - No physical invoice prints. An "invoice record" is put on the customers Open AR account.
    - To record finance charges in separate A/R account and record as income only when paid, see document “Record Finance Charge in Separate A/R Account”.

IMPORTANT: The order in which the Sub-tasks are used for Finance Charge Entry and Editing is important, Sub-task #8 MUST be used first. Sub-tasks 8, 4 & 5 are mandatory; sub-tasks 1, 2, 3, 6 & 9 are optional (use if needed) .

Calculate Finance Charges (Sub-task 8)

The system prompts:

On 1^st screen: Please enter -
- Starting customer #: (enter beginning # or ENTER for All customers)
- Ending customer #: (enter ending customer #)
On 2^nd screen: Please enter -
- Monthly finance charge % (150 = 1.5%)
- Finance charge date: This must be a current months date, not a month that is already closed. (Date used on Finance Charge invoice in AR. Most clients use the last day of the month. Example: invoices on the statement are through January 31^st, statements will be going out February 1^st or 2^nd, therefore date the Finance Charge invoice January 31).
- Invoice cut-off date (Date the computer will use as an ending date cutoff for invoices not paid). Invoices that occur after the cut-off date will not be included in the finance charge calculation. So if you want to apply a finance charge only on invoices more than 60 days old you should enter a cut-off date of 60 days before today. It is not normal to apply finance charges to invoices less than 30 days old.
- Payment cut-off date (Date the computer will use as the last date considered for payments applied to the customers accounts). Payments that are dated after the cut-off date will not be included in the finance charge calculation.
- Minimum past due balance (The minimum past due balance that the system will charge a Finance Charge on. Example: only accounts with a minimum past due balance of $20.00 will get charged a Finance Charge).
- Minimum dollar charge (The minimum dollar amount that will be charged. Example: You can make $5.00 be the least amount that will be charged for a finance charge, even if a customer's past due amount is only $25.00 & the finance charge percent is 2%).
When you say "N" to the "Any change?" prompt the finance charges will be created, but not posted. You will be able to display, print, change, or delete them using the subtasks below. You can reject all of them with subtask 6, or accept and post them with subtask 5. The finance charges will not appear on customer accounts until you post them with subtask 5.

Print Finance Charge Edit List (Sub-task 4)

Print the edit list and review for any changes and/or deletions that might be needed.

Change existing Finance Charge (Sub-task 2)

Make any changes that are needed.

Delete existing Finance Charge (Sub-task 3)

If a customer appears on the edit list that should not be charged finance charges, delete the transaction.

NOTE: if a customer should never be charged a finance charge, change the flag on the customer record to indicate that no finance charges are calculated:

Customer Master (Task 17)
- Change Existing Customer Record (Sub-task 2)
  - Finance Charge: Y/N (field #23)

Enter (ADD) new Finance Charge (Sub-task 1)

If there are customers that are not on the edit list that should be, enter them and the appropriate finance charge that should be charged.

Post Finance Charge to AR Files (Sub-task 5)

When satisfied with the edit list, post the transactions.

This options posts finance charges to the following master files:

Customer Master (only the second screen)
Open Items
Sales History
Distribution History
Batch Control

NOTE: This posting journal should be saved for auditing purposes and added to your A/R month end balancing spreadsheet.

Calculate FC reversals (Sub-task 9)

This sub-task is used to have the system create credit finance charges automatically. See the document “Reversal of (Old) Finance Charge Invoice - Automatically” for the instructions. The Calculate FC reversals sub-task will create credit finance charges only if there is nothing else on the customer’s accounts prior to the “finance charge / activity cutoff date” typed in during the reversal entry prompts. If the customer has other activity on the account which you want to keep, but crediting out the finance charge is needed, a manual finance charge credit may be done. For instructions on this see the document “Reversal of (Old) Finance Charge Invoices - Manually”.

Parameter to check:

Go to:

Accounts Receivable (Module 2)
- System Management Functions (Task 32)
  - Modify Parameter Files (Sub-task 22)
    - A/R – General (Selection 1)
      - Look for the parameter: SKIP’OTHER=N, Y or F
        
        N-No includes 'Other' and finance charges (normal / std)
        
        Y-Excludes 'Other $' and finance charges
        
        F-Excludes finance charges but does include 'Other $'
        
        This parameters tells the system if you want to include the “Other $” and/or finance charges in the customer master file, “Current year sales” and “Prior year sales”.

Note: The sales dollars for item types of Labor go into the “Other” column. So consider this before changing this parameter.