Item Interest Calculation

Purpose

This component enables you to calculate interest on debit and credit items automatically. Individual items and the business transactions that created them are both included in item interest calculation, which allows you to control precisely whether and how interest can be calculated on an item.

Features

The system calculates interest only on those items for which it is able to determine an interest key. The interest key controls interest calculation and can be assigned to contract accounts, a collateral, individual line items or dunning levels. The system normally determines the interest key for each industry, but can also do so on a customer-by-customer basis.

Interest can be calculated on the following items:

Open or cleared debit items
Installment plans
Credit items such as credit memos or cash security deposits
Other

You can calculate interest on debit items when:

Processing individual line items: Interest is calculated on a business partner’s or contract account’s line items.
Using mass processing as part of a dunning run or as a mass activity. Interest can be displayed on the dunning notice.

You can calculate interest on credit items using the following functions:

Processing individual line items
Mass processing

To determine the way in which interest is calculated, you can:

Choose interest calculation methods by which the system determines the number of days on which interest is to be calculated for a given interest period.
Define interest rates based on date and amount in the system
Use reference interest rates (such as discount rates)

During an interest run, the system calculates and posts interest, and creates the required data for correspondence.

To help avoid charging your business partners very small amounts, you can carry out amount checks per customer or industry.

Interest locks enable you to prevent interest from being calculated on certain items. You can also exclude certain business transactions (such as reversal postings or additional receivables for interest calculation).

Interest can be posted so that it is also posted to the general ledger. Debit interest can also be posted as a statistical item (in other words, not posted to the general ledger).

For each interest item, the interest schedule tells you how the interest amount was determined, including source items, interest period and interest rate. This allows you to reconstruct how interest was determined at a later date.

An interest history records the interest calculation period or each line item on which interest is to be calculated. During interest calculation, the selected items and the interest history are considered jointly. This ensures that interest is only calculated for items once for a certain period.

Utilities Industry (IS-U) component

You can store interest keys in the system for transactions. When posting, the system determines the interest key in terms of the transaction specified for the line item and then stores it in the line item.

As in a dunning run, interest can also be determined and posted in invoicing. If you implement the Invoicing component you can include interest on the invoice printout.

Telecommunications (IS-T) component