Financial Charge in Dynamics SL

Finance Charge is an interest accrued on some credits (invoices) or debit memos (adding credits to invoices). Each Company may use different methods to calculate the FC Charges. The most common formula is based on the average daily balance, in which daily outstanding balances are added together and then divided by the number of days in the month.

Let’s see how well Dynamics SL is calculating the financial charges against the credits. We need to do the followings steps for attaining the finance charge calculation. Below are the main steps that we have to setup in Dynamics SL.

Basic steps in AR Setup (08.950.00):

• Open SLàFinancial à Accounts Receivable àAR Setup
• Go to Finance Charge setup tab of AR Setup.
• Enter the Annual finance charge percent.
• Enter the minimum finance charge.
• Always Charge Minimum (check box) Finance charge for past-due customer documents for which the calculated finance charges are less than the minimum finance charge. When this option is selected, all customers with a past-due balance will be charged at least the minimum finance charge. If it is not selected, customers with a past-due balance that calculates to be less than the minimum finance charge will not be assessed a finance charge.
• Compound Finance Charge (check box) Select to compound the customer finance charges for past-due customer documents (calculate finance charges on previously assessed finance charges which are still unpaid).
• When Compound Finance Charge is selected, the following formula is used for the calculation (Current invoice, debit memo, or finance charge balance) x (annual finance charge percentage/365) x (current date – last finance charge due date or invoice, debit memo, finance charge due date, whichever is first).
• If you do not select Compound Finance Charge, the following formula is used for the calculation.
• (current invoice or debit memo balance) x (annual finance charge percentage/365) x (current date – last finance charge due date or invoice, debit memo, finance charge due date, whichever is first)
• Apply Payments to Finance Charges First Area

               If you are auto applying payments, the order in which the software applies payments to outstanding finance charges when using Payment Application (08.030.00) or Payment Entry (08.050.00).

• No, use Document Date Order
  • Applies payments to outstanding customer documents in due-date order, which is the oldest to most current due date.
• Yes, Pay Finance Chgs First 
  • Applies payments to outstanding customer finance charges before applying them to outstanding customer documents, regardless of due date.
• Prompt as Payments are entered
  • Prompts you to indicate whether the payment should be applied to finance charges or open customer documents when entering payments in Payment Application (08.030.00) and Payment Entry (08.050.00).                         

• Default finance Charge Account /Subaccount 

• Finance Charge amount impacts falls on Default finance Charge “Account” in Journal Transaction (01.010.00).

                             Dr – AR Accrual account

                            CR – Finance Charge account

Customer Setup in customer Maintenance (08.260.00)

• Open SLàFinancial à Accounts Receivable àcustomer maintenance (08.260.00)
• Go to other options tab of customer maintenance.
• Check the “Apply finance charges” option to calculate Finance charge for the particular customer.
• Select the Statement cycle from PV Lookup.

Apply Finance Charges (08.520.00):

Apply Finance Charges screen is used to apply finance charges to the past-due open documents of customers who are subject to finance charges.

Note: Any unapplied payment, prepayment, or credit memo documents will be applied to the oldest outstanding past-due documents prior to calculating the finance charge.

Finance charge has been calculated based on the last finance charge date or Invoice due date considered when Apply Finance Charges runs first time for customer.

Calculation of Compound Finance Charges:

Formula of Compound Finance Charges:

Component finance charge option selected in AR Setup

(Sum of Current Invoice, debit memo or finance charge balance)*

(annual finance charge percentage   in AR Setup * 365)*

(current date – last finance charge due date or invoice, debit memo, finance charge due date, whichever is first)

Component finance charge option not selected in AR Setup

(Sum of Current Invoice, debit memo) *

(annual finance charge percentage   in AR Setup * 365) *

(current date – last finance charge due date or invoice, debit memo, finance charge due date, whichever is first)