Finance Charges Settings
This topic will cover how to setup the interest rate, terms, etc., for assessing finance charges.
Use this form to setup rules, rates, and conditions for finance charges. When you apply finance charges to a customer’s account, the rules and settings will be applied. Keep in mind, when Total Office Manager assesses finance charges, it actually creates invoices. This makes the whole process easy to use and change to meet your own needs.
From the main menu, click Customers > Assess Finance Charges, then click the Settings button.
|Annual Interest Rate (%)||The rate you charge per year. Do not enter the % sign. 12% would be 1% each month. There are usually laws related to how much you can charge and under what circumstances. Please check with a qualified expert to be sure. Since this varies by area, our support experts will not be able to help you answer this question.
|Minimum Finance Charge||The absolute minimum you wish to charge for the late fee. $5.00 would mean that you will charge the customer $5.00 or the annual interest rate, whichever is greater. Both the minimum and the interest rate will not be added – only the greater amount.
|Grace Period (Days)||The number of days you allow the bill to be late with out starting your finance charge. The number of “free” days you allow your customer to be late.
|Finance Charge Account||The account that is affected by the finance charge. This is the account that will reflect the income. This might be Miscellaneous Income.
|Assess Finance Charges On Overdue Finance Charges||Charge finance charges on top of finance charges. When checked, Total Office Manager adds interest to existing finance charges. This may not be legal in your area. Please check with a qualified expert to be sure. Since this varies by area, our support experts will not be able to help you answer this question.
For example, suppose that on August 1 you assess a finance charge for a customer whose terms are Net 30. Total Office Manager creates an invoice for the amount of the finance charge. If your customer does not pay by September 2, and you added terms of Net 30 to the finance charge invoice and selected the “Assess Finance Charges on Finance Charges” checkbox, Total Office Manager calculates interest on both the original overdue amount and on the finance charge amount. If you did not select this checkbox, Total Office Manager calculates finance charges only on the original overdue amount.
|Calculate Charges From Due Date
|When selected, finance charges will start on the date the invoice was due.|
|Calculate Charges From Invoice/Billed Date||When selected, finance charges will start on the date of the invoice and NOT necessarily when it was due.|
|OK||Closes the form and saves your changes.
|Cancel||Closes the form and does NOT save your changes (if any).|
Open the form as noted above.
Enter an annual interest rate.
Enter a minimum finance charge. This is optional.
Enter a grace period (in days). This is optional.
Select an account from your chart of accounts. This will be used to track the income.
If you wish to add finance charges to finance charges already assessed, select the Assess Finance Charges On Overdue Finance Charges option.
Select the Calculate Charges From Due Date or Calculate Charges From Invoice/Billed Date as needed. See above for complete explanation of what each means.
- How Total Office Manager calculates finance charges? Total Office Manager uses the following formula to calculate finance charges: Number of days past due x balance due x finance charge rate as % / 365
- Finance charges will start at the beginning (the day the bill was due) when the customer goes beyond the grace period. In other words, if the customer does not pay within the grace period, the finances charges start at the beginning as usual.
- There are laws regarding how much you can charge and under what conditions. Please check with a qualified expert to be sure you are doing it properly. Since this varies by area, our support experts will not be able to help you answer this question.