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Process documentationInterest on Arrears

 

In this process, you can calculate interest on arrears for loans for which the payment plan principle applies. If the account holder has not paid, or only partially paid the receivable by the expected payment date, the system calculates interest on arrears from the expected payment date up to the settlement date. If the account holder pays in full before the settlement date, the system calculates interest on arrears from the expected payment date up to the date on which the payment is received. The system calculates balance-based interest on arrears during settlement on the due date of the pricing condition.

You invoice the interest on arrears during an additional billing run during end-of-day processing. Alternatively, you can invoice the interest on arrears during regular billing.

Prerequisites

  • In the menu for Account Management (FS-AM), you have stored the required data under Current Settings. For more information, see Current Settings for Interest on Arrears Calculation.

  • You have created an account with the required settings for interest on arrears. For more information, see Settings in Account for Interest on Arrears Calculation.

  • Before interest on arrears incurs, all of the following points must apply:

    • The system has already generated open items during billing.

    • The tolerance days have been exceeded.

    • The system has not, or not completely cleared the open items before settlement.

Note Note

You can define minimum and maximum amounts for which the system does not calculate interest on arrears. For more information, see Minimum and Maximum Amount of Interest on Arrears Calculation.

End of the note.

Process

  1. To post interest on arrears, use Execute Account Settlement (seeExecute Account Settlement).

    The system does not calculate interest on arrears during account settlement based on individual open items, which only the open item management system recognizes in this form. The system calculates interest on arrears based on the balances per turnover class. When a payment is received, the system uses it to clear the open item with the earliest due date for each turnover class.

  2. During end-of-day processing, you use Execute Account Billing to generate the open items in an open item management system (see Execute Account Billing).

    Note Note

    In Customizing under Define Condition Types, you can use the Event for Account Billing field to define that account billing is to be executed during end-of-day processing on the same day as account settlement.

    End of the note.

  3. You can use the open items management system to invoice the account holder for interest on arrears by choosing Execute Individual Invoicing.

  4. If you calculate interest on arrears, the system includes backdated changes in the calculation.

    The system includes backdated changes to conditions, such as to the percentage for interest on arrears, in the next settlement.

Result

You can display the results as follows:

  • In the contract on the Cash Flow tab page

  • in the report Display Balances and Key Figures as follows:

    • using the Cash Flow pushbutton

    • Using the Settled Period pushbutton

    • On the Interest and Capital Amounts tab page (see Interest and Capital Amounts)

  • Using the transaction Display Billing Items.