An Interest Invoice is generated to charge customers for overdue invoices and late payments.
Scenario:
Invoice Date : 18/5/2022
Due Date : 17/6/2022
Calculate Interest Until : 31/07/2022
Invoice Amount : RM 1,200.00
Interest : 3% per annum
Run Interest on : 17/08/2022
Before recording an interest invoice, you must activate the late interest in the payment terms. Follow the steps below to activate it.
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: Creating a Invoice & Proforma Invoice. 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 activated.
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 period to calculate interest on overdue invoices. Interest will be applied from the day after the invoice due date up to the selected end date, covering only the overdue days.
4. Select the transaction date for the interest invoice.
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 31/07/2022)
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.
