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Information about how the payment amount for a scheduled payment is calculated in Receivables Management

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This article contains information on how the system calculates the payment amount for a scheduled payment in Receivables Management in Microsoft Dynamics GP and in Microsoft Business Solutions - Great Plains 8.0.

Applies to:   Microsoft Dynamics GP
Original KB number:   968049

More information

Information about the scheduled payment

A scheduled payment is created from a posted sales/invoice document, a debit memo document, or a service/repair document in the Receivables Scheduled Payment Entry window. To open this window, on the Transactions menu, point to Sales, and then select Scheduled Payments.

Consider the following example: If you keyed a sales document for $10,130.64, you can make it a scheduled payment in the Receivables Scheduled Payments Entry window by entering this additional information:

  • Interest Type: Compound
  • Schedule Amount: $ 10,130.64
  • Schedule Interest Rate: 20%
  • Payment Frequency: Monthly
  • Number of Payments: 60

Select Calculate and then select Amortization to view the 60 lines in the amortization schedule. The first five lines will be displayed as follows:

Payment Due Date Payment Amount Principal Interest Principal Balance
1 5/12/2009 $268.40 $99.56 $168.84 $11,131.08
2 6/12/2009 $268.40 $101.12 $167.18 $9,929.86
3 7/12/2009 $268.40 $102.90 $165.50 $9,826.96
4 8/12/2009 $268.40 $104.62 $163.78 $9,722.34
5 9/12/2009 $268.40 $106.36 $162.01 $9.615.98

First payment interest information

The following equation is used to calculate the first payment interest amount:

Interest amount = schedule amount x schedule interest rate / payment frequency

The following example shows how the first payment interest amount is calculated:

Interest = $10,130.64 x .20 /12(monthly)

The interest amount in this calculation is $168.84.

Monthly payment amount

The following equation is used to calculate the monthly payment amount:

Monthly Payment amount = Principal amount 
/ (1 + monthly interest rate) to the N power - 1 
/ monthly interest rate X (1 + monthly interest rate) to the N power.

Note

In this equation, replace the placeholder N with the number of payments.

The following example shows how the monthly payment amount is calculated:

  • principal amount: $10,130.64
  • monthly interest rate: 0.20/12 = 0.016667
  • number of payments: 60

By using the information in this example, the following equation is used to calculate the monthly payment amount.

monthly payment amount = $10,130.64 / (1.016667) to the 60th power - 1 / .01667 x (1.016667) to the 60th power.

The payment amount in this calculation is $268.40.

Note

The last payment will make a decimal adjustment on the Payment Amount if it is needed. In this example the Payment Amount for Payment 60 is $268.32 instead of $268.40. The last payment will also show the Principle Balance as $0.00 as it has been fully paid.