DBD: AR Finance Charges

DBD: Accounts Receivable - Finance Charges

Step 1: Enable Finance Charge for a Customer

You have the capability to set each of your customers in customer setup/inquiry with a flag to charge a Finance charge. If you wish to have this customer subject to Finance Charge, then set this question to Yes in the customer's constant data:

Path: Tab 2 Setup, Finance Charge Setup

Customer Constant Data - ARGMAB

Setup Rate to Be Set for Each State

Finance Charge Rates are setup in the State Setup File. Each State can have a different Finance Charge Percentage.

Path: Setup > Other Setup > System Utility Functions > State Codes

State Setup - ZYGMCA

Finance Charge Calculation

Path: DB Distributor > Accounts Receivable > Period End > Finance Charge Application > Calculation

Finance Charge Calculation - ARGRCD

The Finance Charge Calculation screen settings determine which customers are eligible to have finance charges applied to them.

Follow these steps to complete the panel:

1. If you want to narrow this report by a range of customers, enter in customer codes to begin and end the report with.
2. Enter the Starting Invoice number to assign to these invoices. Recommend starting these invoice numbers with 99 to help identify them as non-standard invoices.
3. Use the drop down at Apply Finance Charge to select based on ageing.
4. Enter in a dollar amount that finance charges must reach before they are valid. Any finance charges below this amount will not write to the finance charge file.
5. Select the fiscal year and accounting period that this report should run for.
6. Press Calculate for the system to apply the finance charge.

Continue to Specific Finance Charge Entry to edit/delete invoices in this entry file.

Optionally, continue to Invoice Printing to print invoices for the finance charges.

Continue to Finance Charge Journal / Update. You can print this journal to review the invoices created by the system. If any of these records need to be modified, then select the Specific Finance Charge Entry to edit/delete records. If you do not need to edit or print Invoices, then select the option to update.

Specific Finance Charge Entry

Path: DB Distributor > Accounts Receivable > Period End > Finance Charge Application > Specific Posting

Finance Charge Data Entry - ARGRCC

Use the Specific Finance Charge Entry to edit any of the finance charges that were calculated by the Finance Charge Calculation program.

Follow these steps to complete the panel:

1. Select the fiscal year and accounting period to be edited.
2. Select the invoice number that needs to be edited.
3. Edit the finance charge amount or press the Delete button to remove the finance charge.
4. If you have changed the finance charge amount, press the Proceed button to make the necessary GL entry.
5. Press Save.

Invoice Printing (Optional)

Continue to Invoice Printing if you wish to print invoices for the finance charges (this is optional), or continue to the Finance Charge Update.

Finance Charge Journal and Update

Path: DB Distributor > Accounts Receivable > Period End > Finance Charge Application > Journal and Update

Finance Charge Journal & Update - ARGRCS

Use the Finance Charge Journal and Update to print a report of the finance charges that have been calculated and update them to the customer accounts. The Revenue posting for these Finance Charge invoices is setup in the G/L interface for this division.

Follow these steps to complete the panel:

1. Review the Output Options.
2. Press Print Report.
3. If the report appears correct, you can Update the data. If the report is incorrect, you should Exit the update, and return to Specific Finance Charge Entry to make any adjustments.

This will create an open invoice in your customer's open invoice file. These invoices will be processed thru Cash Receipts just like their other invoices as the client remits payment.

Quick Reference Guide for Finance Charges

1. Make sure you have a Current Ageing of your Customer Open Invoices
2. Finance Charge Calculation (this is the automatic selection of customers that you wish to have Finance Charges applied to)
3. Specific Finance Charge Posting (this allows you to add/change/modify/delete entries selected by the Finance Calculation)
4. Finance Charge Invoice Printing (Optional)
5. Finance Charge Journal/Update

Frequently Asked Questions

Q: How do I make a customer subject to finance charges?

A: In the customer's constant data, Tab 2 Setup, Finance Charge Setup, set the Finance Charge flag to Yes.

Q: Where is the finance charge rate set?

A: In the State Setup File (Setup > Other Setup > System Utility Functions > State Codes) — each state can have a different Finance Charge Percentage.

Q: What should I do before running Finance Charge Calculation?

A: Make sure you have re-aged your customers first — this is critical before running the calculation.

Q: How do I edit a finance charge after it's been calculated?

A: Use Specific Finance Charge Entry (DB Distributor > Accounts Receivable > Period End > Finance Charge Application > Specific Posting) to edit the amount or delete the charge, then Proceed to make the GL entry if changed, and Save.

Q: What's the overall order of steps for processing finance charges?

A: 1) Make sure customer open invoices have a current ageing. 2) Run Finance Charge Calculation. 3) Use Specific Finance Charge Posting to adjust entries if needed. 4) Optionally print finance charge invoices. 5) Run Finance Charge Journal/Update.

Q: How do these finance charge invoices get paid?

A: They create an open invoice in the customer's open invoice file and are processed through Cash Receipts just like any other invoice as the client remits payment.

Tags: accounts-receivable, finance-charges, month-end, state-setup, DB-distributor