Finance Charge Balance Remains on Customer's Card

When a finance charge is received on a payment - there are two separate transactions created.

The first is the booking of the finance charge, which is recorded as a debit to Accounts Receivable and a credit to Finance Charge Income, or whatever account you have setup as the linked income account for finance charges under Linked Accounts > Sales.

The second transaction is the payment of the finance charge.

Let’s say a customer has a $500 invoice. He sends you a check for $510 and you apply it to the customer’s invoice under Receive Payments. Instead of applying the full $510 to the invoice, and letting the $10.00 remain as a credit on the customer's account, you apply $500 and let the $10 drop into finance charge.

Here’s what is being booked behind the scenes

The CR transaction credits A/R for $510. The SJ transaction is the booking of the Finance Charge ‘sale’.

After this transaction is posted, you realize that the overpayment should have been booked as a customer credit, NOT as Finance charge. The correct procedure is to DELETE the CR – the payment – AND the SJ – the Finance charge Invoice. If you leave one piece of these un-deleted, your customer will retain an incorrect balance when you view their balance on their card and reports.

This can be remedied by deleting the payment and the invoice. If the payment was already deposited under Prepare Bank Deposit, then you will have to reverse the bank deposit, delete and re-enter the customer payment correctly, then re-do the bank deposit under Banking > Prepare Bank Deposit. The dollar figure of the bank deposit will be identical to the original.