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This article describes how finance charges are calculated in the Dynamics SL Accounts Receivable module.
Finance charges are calculated from the Document Due Date and the Statement Cycle Last Finance Charge Date, whichever is later. If the finance charge that is calculated is less than the minimum finance charge, the minimum finance charge is used.
This article describes how Dynamics SL calculates the finance charge on a specific invoice that uses the following criteria:
Annual Finance Charge (AR Setup): 12.00
Compound Finance Charges (AR Setup): NO
Invoice Balance (Document Maintenance): $1000
Invoice Due Date (Document Maintenance): 10/01/2004
Last Finance Charge Date (Apply Finance Charges): 11/01/2004
Finance Charge Date (Apply Finance Charges): 12/01/2004
Dynamics SL computes the annual finance charge per day. In this case, the annual finance charge per day is 0.03287% (12.00/365 = 0.03287).
Dynamics SL finds the number of days to calculate the finance charge on by subtracting either the Last Finance Charge Date or the Invoice Due Date (whichever is later) from the Finance Charge Date. In this case, the number of days is 30 (12/01/2004 – 11/01/2004 = 30 days).
Dynamics SL calculates the finance charge for the month by using the following formula: (finance charge per day) * (number of days) * (invoice balance) = (finance charge). In this case, the finance charge is $9.86 (0.03287% per day * 30days * $1000 = $9.86).
Note Any unapplied payments or credit memos that a customer has affect this calculation. Dynamics SL assumes that those payments are applied to the oldest invoices before it calculates the finance charge.
For more information about the finance charge calculation process, see the "AR Setup - AR Finance Charge Setup" topic in the Accounts Receivable documentation.
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