Interest on Arrears

Use

You can use this function to calculate and post interest on arrears for items open on the calculation key date or for open items and items that were cleared late for a loan.

Note Note

You can only use this function for loans that are based on the product categories Mortgage Loans (300), General Loans (330), and Consumer Loans (340).

End of the note.

This function does not support batch input. However you can use the function Calculation of Interest on Arrears for mass processing of loans.

Integration

This function is connected to the following functions:

  • Workplace for Business Operations

    You can use this function in the Workplace for Business Operations .

  • Edit Contract for the product categories Mortgage Loan (300) and General Loan (330)

    In the functions for processing loans from the product categories Mortgage Loan (300) or General Loan (330) , choose Basic Data ->Control to define the following:

    • An interest on arrears lock

    • Expiry date of the interest on arrears lock

    • The calculation profile for the interest on arrears calculation

    • An end date for the non-IOA period

  • Edit Consumer Loans

    In the editing functions for loans from the product category Consumer Loan (340) you can define the following under Credit Standing :

    • An interest on arrears lock

    • Expiry date of the interest on arrears lock

    • An end date for the non-IOA period

  • Change Account Statement

    You can set or remove interest on arrears locks at the document level in the functions for processing the account statement. You can do this by selecting one or more document lines and choosing Start of the navigation path Extras Next navigation step IOA Lock. End of the navigation path .The documents you select are no longer included in the calculation of interest on arrears.

    The system writes separate change documents for this action and displays these on the loan contract screen.

  • Calculation of Interest on Arrears

    You can display interest on arrears calculations that you have created with the Calculation of Interest on Arrears, with this function in the Workplace for Business Operations.

  • Other Business Operations

    You can calculate interest on arrears in the business operations listed below, provided you have made the appropriate settings in Customizing. The system does not create a separate business operation from the category Interest on Arrears , but you can have the interest on arrears displayed on the Other Flows tab page in the business operations listed below. However, if you create an additional business operation from the category Interest on Arrears for the loan, the system displays the calculated interest on arrears on the Calculated IOA tab page.

    Business operations in the case of loans from the product category Consumer Loan (340):

  • Discharge Consumer Loan

    You can calculate interest on arrears within the Discharge function. The interest on arrears calculated is included in the discharge amount. However, the system does not create a separate business operation from the category Interest on Arrears. If you create an additional business operation from the category Interest on Arrears for the loan, however, the system displays the calculated interest on arrears on the Calculated IOA tab page. This function is not in the Workplace for Business Operations , but in the processing functions for loans in the product category Consumer Loans (340).

  • Release

    This function is integrated in the release procedure.

  • Correspondence

    You can create correspondence about the calculated and posted interest on arrears.

Prerequisites

Interest on Arrears

To be able to use this function you need to have executed the following IMG activities in the Customizing for Loans Management :

  • Under Define Flow Types, you have defined the flow types for the debit and rebate of interest on arrears as well as the flows for the incoming and outgoing payment.

    Note the following:

    • All flow types for interest on arrears must be assigned to the flow category Interest on Arrears (VEZ1).

    • You have to create flow types with which you want to post the interest on arrears as debit flow types.You have to create flow types with which you want to rebate the interest on arrears as credit flow types.

  • Under Assign Offsetting Flows, you have assigned offsetting flows to the flow types.

  • In the IMG activity Define Account Determination , you have defined the account determination for the flow types, for further processing of the amounts.

  • Under Define Condition Types, you have defined condition types for interest on arrears for each flow type grouping. You assign the flow type for the debit posting as flow type 1 and the flow type for the credit posting as flow type 2.

  • You have made the following settings under Define Condition Groups :

    • In the Assign Condition Types to Condition Groups, view you have assigned the available condition types.

    • In the Assign Flow Types to Condition Groups per Application, you have assigned the application subfunction Business Operation Interest on Arrears ( 570) to the available flow types.

    • You have assigned the condition types used within interest on arrears in the Assign Condition Types to Condition Groups per Application view.

  • In Define Old Interest on Arrears Flow Types Without Recalculation, you have defined the flow types with which the system calculated and posted interest on arrears for loans from the category Consumer Loan (340) in releases prior to SAP ECC Enterprise Extension Financial Services 6.0 (EA-FS 600) or that you have migrated from an external system.

  • Under Define Templates you have defined templates for the calculation of interest on arrears for each product.

  • Under Define General Control Data, you have defined which tab pages are to be available in the application.

  • Under Define Calculation Profiles, you have defined your profiles and assigned attributes for the calculation and posting of interest on arrears to each profile.

  • Under Define Trivial Amount Limit Per Calculation Profile, you have defined the trivial amount limits for your calculation profiles.

  • Under Define Default Calculation Profiles, you have defined default calculation profiles for interest on arrears calculation for the product categories Mortgage Loans and General Loans . These default settings are used when you create an offer, an application, or a contract, but you can change them before you make the first posting.

  • Under Define Flow Type Groupings, you have defined your flow type groupings.

  • Under Assign Flow Types to Flow Type Groupings , you have assigned the flow types for which the system is to calculate the interest on arrears within a group to your flow type groupings.

  • Under Assign Condition Types to Flow Type Groupings, you have assigned a condition type to each flow type grouping. The system uses this condition type to calculate the amount of interest on arrears.

  • Under Assign Flow Type Groupings to Calculation Profiles, you have defined which flow type groupings are to be included in the various calculation profiles.

  • Under Activate Interest on Arrears Calculation per Business Operation Category , you can activate the interest on arrears calculation for other business operation categories.

  • Under Activate Int. on Arrears for Each Bus. Op. Categ. and Prod.Type , for the product categories Mortgage Loans (300) or General Loans (330) , you have activated the interest on arrears calculation for each product type for other business operation categories, for example, deferral or payoff.

  • Under Define Standard Conditions ,you have defined standard conditions for interest on arrears for each product type for the product categories Mortgage Loans and General Loans . If you have not defined any valid interest on arrears conditions for the loan, the system uses the standard conditions for the interest on arrears calculation.

Release

If you want to use the release function within this function, you must make the appropriate settings for the interest on arrears calculation in the activities Maintain Active Indicators , Define Release Status Parameters , and Maintain Workflow Settings in the Release section of Customizing for Loans Management .

For more information, see the Prerequisites section in Release

Correspondence

If you want to use the correspondence function within this function, you need to have executed the Customizing activities under Correspondence with Correspondence Tool (SAP Smart Forms) in Customizing for Loans Management .

Product

You have defined the calculation profile for the interest on arrears calculation in the product on which the loan is based. The loan must belong to the product category Consumer Loan (340). You define Products in the SAP Easy Access screen under Current Settings .

When you create a loan the system assigns the calculation profile from the attributes of the product to the loan. Once you have saved the loan, you cannot change this assignment.

Product Type

You have selected the checkbox for interest on arrears calculation in the product type definition under the Customizing activity Define Product Types . Selecting the checkbox allows the interest on arrears calculation to be performed from the Workplace for Business Operations . This checkbox is only available for product types belonging to the product categories Mortgage Loans (300) and General Loans (330).

Additional Prerequisites

  • Before the interest on arrears calculation you need to have cleared the qualified overpayments on the loan, by executing the function Automatic Processing of Overpayments for Consumer Loans or Clear Overpayments Automatically. If you do not do so, the system calculates interest on arrears on the items that have not been cleared yet and the amount of interest on arrears will be too high.

Features

The items for which interest is to be calculated are grouped according to their flow types into flow type groupings and the system calculates interest on these together. You can group all of the interest payments or repayments to one flow type grouping, for example.

The system calculates the interest on arrears using a model account. The debit postings for the loan are treated as outgoing payments on the model account and the incoming payments for the loan are treated as incoming payments on the model account. The rate of interest on arrears sets the interest calculation for the account.

The system reads this rate from the loan. If there are no interest on arrears conditions available, the system determines the conditions from the condition table for business operations for loans from the product category Consumer Loan . For loans that are based on the product categories Mortgage Loans , Borrower’s Note Loans , or General Loans , the system determines the interest on arrears conditions from the table of standard conditions. The posting of the interest on arrears corresponds to account settlement.

You can use the following functions:

Calculation tab page

  • Calculation

    The system calculates the interest on arrears for the period from the date of the last posted or activated interest on arrears flow to the specified key date for the current interest on arrears calculation.

    You can only execute one interest on arrears calculation for each key date. The system considers activated postings as Posted .

    If the Key Date From (Excl.) is entered manually, the system only calculates the interest on arrears from the date entered.

    If the key date entered is in the future, the system also calculates interest on arrears for planned records (that may be in the past). However, in this case it is not possible to post or activate the business operation.

  • Recalculation

    If the Recalculate Preceding Periods checkbox is selected, the system checks whether the calculation base is different for any preceding period in which the interest on arrears calculation was performed.

    If the calculation base for one or more periods has changed, the system automatically recalculates all periods calculated previously. It also posts any differences.

    The calculation base could have changed for the following reasons, for example:

    • Subsequent reversals

    • Subsequent setting or removal of interest on arrears locks in documents

    • Incoming payments with value dates in the past

      If the system identifies a rebate on interest on arrears, it displays an error message and does not calculate the interest on arrears for the loan.

      You are then required to manually reverse the interest on arrears already posted and execute the interest on arrears calculation again.

      If Collective Postings is set up, the system posts the recalculation amount along with the amount for the current calculation period in one document.

  • Posting

    Within the status concept of the Workplace for Business Operations , you can enter, activate, delete, post, reverse and, provided the release procedure is activated, release the calculated interest on arrears. For more information, see the Features section of the Workplace for Business Operations .

  • Payment Methods

    Within the payment options you can also determine the bank details and the payment method. These are required for posting the interest on arrears calculation.

Calculated IOA tab page

  • Posting History

    In the Posting History section the system lists all the activated and posted interest on arrears amounts. Interest on arrears runs that have been activated or posted with Collective Posting are displayed in the posting history with an amount for each flow type grouping. If the posting type Single Posting has been used, each posting corresponds to a change in the progress of the model account.

  • Calculation Details

    In the Calculation Details section, the system displays how the interest on arrears amounts calculated are made up in detail. The system displays the calculation details for the current business operations and all calculation details for all activated and posted interest on arrears for the loan. A set of calculation details corresponds to the progress of the model account per flow type group. If you want the system to display the documents that make up an interest on arrears amount, select a row and choose Original Documents .

    However, if an open item already existed before the interest on arrears posting, this item is not displayed here. To display the open item, you must select the interest on arrears calculation for the period in which the open item originates.

    The system displays the following calculation types in the Calculation Details section:

    • New Calculation : Newly calculated interest on arrears

    • Activated Calculation : The interest on arrears is activated. This type of calculation is only displayed if there is a more recent business operation. The activated calculation is displayed in the history for that business operation.

    • Posted Calculation : The interest on arrears is posted.

    • Delta Recalculation : Interest on arrears is recalculated for the loan. The resulting difference is displayed.

    • Recalculation : A recalculation is made for periods for which interest on arrears is already calculated. The comparison of these results with the results under Posted Calculation or Activated Calculation results in the Delta Recalculation .

Administrative Data tab page

The system displays data, such as the dunning data and the posting control information from the interest on arrears template, by default. You can change the entries from the selected template.

You can also navigate to the following dialog options:

  • Choose Cash Flow to have the system recalculate and display the current cash flow, with or without consideration of the interest on arrears.

  • Choose Display Contract to branch directly to the loan contract screen.

  • You can display the Loan Summary, the Total Commitment or the Account Statement for the loan.

  • Choose Generate Correspondence to generate the relevant correspondence for the interest on arrears, dependent on language and partner role.

  • Choose Display Profile Data to display the settings for the calculation profile used (for example, tolerance days, single or collective posting).

  • You can enter and edit memos in the Memo Pad .

  • Choose File to create and edit a file for the loan.

Activities

  1. In the SAP Easy Access Menu chose Start of the navigation path Accounting Next navigation step Bank Applications Next navigation step Loans Management Next navigation step Position Management Next navigation step Business Operations Next navigation step Workplace for Business Operations End of the navigation path .

  2. Enter the loan required.

  3. Double-click on Interest on Arrears.

  4. Enter or change the relevant data and save, then activate or post the business operation.

See also:

Business Operations