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In RMS do finance charges work? I want the charge to only be applied to balances that are in the 1-30 days past due and beyond. Currently I am not sure what it is doing. I have it set to 18% annually or 1.5% per month. I have an account that had no past due amount and $171.44 in new charges and it added $ .56 in finance charges
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Hello Richard,
Thank you for your questions.
Use the Account Types command in the Database menu to define the types of accounts your store(s) will use. When you create the account type, you specify how Store Operations will handle finance charges on Customer Account Statements. You can also use the Accounts tab in the Configuration menu option to define the default account type for new customers.
When you click Account Types in the Database menu, you will see a list of all your account types. Click New to create a new account type; click Delete to delete the selected account type; click Properties to modify the selected account type; or click Copy to copy properties from the selected account type.
When you click New or Properties, you will see the Account Type window: The fields in this window are described below:
Account type description: The name (e.g., Revolving Charge Account; House Credit; Preferred Customer) by which the account type will be referenced.
Minimum payment: The lowest amount the customer should pay towards the account. This amount is displayed on the statements. The Minimum Payment field serves only to advise the cashier/customer about the minimum amount. The customer may pay an amount that is less than the defined minimum payment.
Due dates:
· Due after closing date plus __ days: The number of days after the closing date (as defined in the Accounts tab of the Configuration menu option) a customer with an account balance is given to pay off the entire balance before a finance charge is assessed.
· Due after invoice date plus __ days: If you bill your customers for net terms, you can specify the number of days the customers have to pay the account balance. For example, if one of your account types allowed customers to pay within 30 days, you could enter the number "30" in this field.
Finance charges:
· Apply charges on finance charges: If selected, Store Operations will include any previously unpaid finance charges, along with the current outstanding balance, when calculating the current billing cycle's finance charge. Note that in some states, it is unlawful to include any previously unpaid finance charges when calculating a new finance charge. Check with your state laws to determine the exact policy.
· Minimum finance charge: The minimum dollar amount a customer must pay if there is an outstanding account balance. Store Operations will compare this amount with the computed finance charge for the current billing cycle and apply the higher amount as the finance charge to be paid by the customer.
· Annual interest rate: The annual finance rate for the charge account. Store Operations determines any applicable finance charge per billing cycle for each account with a balance. The finance charge is computed as follows:
The total finance charge is the sum of the finance charges on all account receivables. The finance charge on each account receivable (AR) is calculated by:
(Daily interest rate) * (Days overdue) * (Chargeable balance)
Where:
· Daily interest rate = (Annual interest rate / 100) / 365
· Days overdue = The number of days overdue on the AR or the number of days since the last closing of the billing cycle. Store Operations will use the number that is smaller.
· Chargeable balance is calculated as follows: If paid in full before grace period, the chargeable balance = 0. Otherwise, the chargeable balance = the average daily balance of the AR during the billing cycle.
Example
For example, assume your customer is charged an 18% annual interest rate on his account. He has two open account receivables.
Account Receivable #1 (AR1):
Balance = $140
Overdue = 15 days
Account Receivable #2 (AR2):
Balance = $352
Overdue = 45 days
Daily Interest Rate = (18% / 100) / 365 = .000493.
AR1's finance charge = (0.000493*15*140) = 1.035.
AR2's finance charge = (0.000493*30*352) = 5.206 (Note that the billing cycle was closed on the 30th day)
Total finance charge = 1.035 + 5.206 = 6.241 = 6.24
Let us know if you have any other questions.
Interesting thing is that it printed 2 statements for the same customer\same account number that was exactly the same except that it didn't apply a finance charge
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