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I invoiced a client June 14th with a due date of September 30th. The client had an earlier outstanding balance which is subject to monthly finance charges. In order to assess finance charges for the older balance only for June, July, August and September, I needed to exclude the June invoice amount, selecting 31 - 60 days at "Includes Balances and Older", for June and July. For August I selected 31 - 60 days. Is my assumption correct that the finance charge amount would be the same for all 3 months, due to the fact that I selected 61 - 90 days in August, which would then exclude the June and July finance charge, as well as the June invoice amount?
Or can someone explain why the finance charge would be the same for all 3 months? When I compare the Finance Charge Detail Reports for July and August, the "Past Due Balances" are the same for both months, meaning the finance charge is the same.
Thanks in advance.
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Hi
I am a little lost in the specifics of this query, but here are some things that might help you figure out if the calculation is correct.
In Receivables Management Setup, there is an option that can be selected to "Compound Finance Charges". If that is selected, then the unpaid finance charges would add to the calculation of the outstanding balance. If it is not selected, then finance charges are ignored in calculating the new finance charge.
The finance charge is simply a percentage of the outstanding balance today. So if the same invoices are outstanding in June, July, August and September and you are ignoring finance charges in the calculation, then I would expect the calculation to be the same each month.
Hope that helps.
Cheers
Heather
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