Finance Charges

Finance charges can be generated for customers with overdue balances.  The finance charge code specified for each customer on the Customer File is used to determine whether the customer is subject to finance charges and the rate used for finance charge calculations.  If the finance charge code is left blank, the customer is not subject to finance charges.  If a finance charge code is entered, the finance charges calculated for the customer are based on the finance charge information on Reference File record category 309 with the corresponding charge code.

The finance charge document code is retrieved from the default finance charge default code on Reference File category 328.  You have the option to change this code between customer statement runs, however, the new default code must have a document type of '5' (finance charge as defined on Reference File category 329).

Each overdue open item is tested to determine whether it should be added to the customer total amount subject to finance charges.  The number of days overdue is calculated by subtracting the open item due date from the last aging date.  The days overdue is then compared with the grace days value on the finance charge information record on the Reference File.  If the number of days overdue is greater than the number of grace days, the open item amount is added to the total amount subject to finance charges.  This amount is reduced by all on-account payments for the customer.  If the amount subject to finance charge is greater than zero after on-account payments are applied, the remaining amount is multiplied by the finance charge rate to get the finance charge amount.  Finance charge transactions are created for each company/location for which the customer has an amount overdue subject to finance charges.

Finance charges are calculated each time the Customer Statement Print Program (AR370P) is executed.  For example, if a customer receives two statements a month, finance charges are calculated and charged twice a month.