Generate Interest

Practice Admin Partners IT Mgr Credit Controllers

Interest can be applied to a client's outstanding DRS balance. The interest is calculated from the client’s credit terms as set on the DRS Collection page within the client details.  A checkbox on the client record allows you to control which clients this facility is used for. The process for generating and approving interest is similar to that of Statements.

  • Interest are applied to any outstanding DRS amounts up to and including the Interest Date and is also based upon the client’s credit terms as set up on the DRS Collection page.

Generating interest

  1. Go to the Data Maintenance section of the Admin menu.

  2. As with statements a minimum balance and an effective date can be applied before interest are generated. The generation routine allows the following criteria to be used in the process:

    • Interest Date: The cut off date for transactions to be included. Transactions dated before and including this date will be taken into account for interest to be applied to

    • Interest Rate: The interest rate to be applied to the outstanding amount

    • Minimum Amount: Set the minimum amount if required. This is the minimum amount of interest to be generated against the outstanding DRS balance. Clients with DRS balances that will generate an amount of interest below the minimum will be ignored in the generation procedure.

  3. Click Generate Interest to generate the interest ready for review.

The DRS amount that the interest is calculated on is based on the amount that is outside of the client’s credit terms as at the Interest Date less any outstanding credits.

The calculation that is used is:

(Outstanding DRS amount over credit terms – outstanding credits) * Interest Rate * (Days in accounting period/ days in accounting year)

Interest are not charged on interest items.

Create and post interest

Interest should be generated, reviewed and posted from this page on a monthly basis.

  1. Enter the following information:

    1. Charge Date: The cut off date for transactions to be included. Transactions dated before and including this date will be taken into account for interest to be applied to.

    2. Charge Rate: The rate to be applied to the outstanding amount.

    3. Minimum Amount: Set the minimum amount if required. This is the minimum DRS balance to which the charges should be applied.

  2. Once the criteria has been selected, click Generate Interest/Finance to generate the interest ready for review.

The DRS amount that the interest is calculated on is based on the amount that is outside of the client’s credit terms as at the Charge Date less any outstanding credits.

The calculation that is used is:

(Outstanding DRS amount over credit terms – outstanding credits) * Charge Rate
* (Days in accounting period/ days in accounting year)

Interest items are excluded from the calculation.

Example 1

  • Client X has credit terms of 30 days.

  • DRS Amount = £1000 at 15th July 2020

  • Interest generated on 30th July 2020

  • No interest generated as DRS amount is within the credit terms.

Example 2

  • Client Y has credit terms of 30 days.

  • DRS Amount = £1000 at 29th July 2020

  • Interest generated on 30th August 2020

  • Interest generated = £1000 * 10% * (30/365)

Example 3

  • Client Z has credit terms of 30 days.

  • DRS Amount = £1500 made up from £1000 at 29th July 2020 and £500 at 15th August 2020.

  • Interest generated on 30th August 2015.

  • Interest generated = £1000 *10%*(30/365)