Interest Invoice is the interest charged on a customer's overdue invoices and late payments is charged to the customer.
Scenario:
Invoice Date : 18/5/2022
Due Date : 18/6/2022
Calculate Interest Until : 31/07/2022
Invoice Amount : RM 1,200.00
Interest : 3% per annum
Run Interest on : 17/08/2022
Before you record the invoice with the interest, you need to activate the late interest in your payment term. Follow the steps below to activate the late interest.
Set Up the Payment Term with Interest
1. Navigate to Control Panel > Payment Terms.
2. Click +New to add a new payment term.
3. Key in the Payment term Name, Description, Type and value.
4. Scroll down to the Late interest section. Tick the button to activate late interest.
5. Key in the interest rate.
Example : 3%
6. Select the Interest Account.
Note: The interest amount will be posted to this account.
7. Select the Interest Product if any. *(Optional)
8. Click on Save.
Record the Invoice
1. Navigate to Sales > Invoices > +New.
2. Record your sales invoice. You may refer article here.
As per scenario above, the date is 18/05/2022 and the Invoice Amount is RM1,200.00.
3. On the Payment section, click on + Term and select the payment term with interest.
4. Once done click on Save.
Run the Interest Invoices
1. Go back to Sales > Invoices > (...) beside +New > Run Interest Invoices.
2. Select the Preset Invoice you want to run.
If you have you own specific date, kindly choose Custom.
3. Select the date of Invoices to run the interest under Run Interest Between.
4. Select the transaction date.
Date you run the interest.
5. Click on Run.
6. System will informed you how many late payment invoices created.
7. You can see the auto generated invoice number with % appear on your list.
8. Click on View to see the details.
9. Inside the item field, the system will show to you the calculation of late interest.
Calculation:
Overdue Days: 44 Days (18/06/2022 to 31/7/2022)
Invoice Amount x 44/365 x 3%
RM1200 X 0.12054 X 0.03 = RM 4.34
10. The interest account is auto selected for you based on your setting.
11. Send this interest invoice to your customer.
