Setting Up Customer Terms - Finance Charges, Discounts & Due Dates

Background
About Finance Charges
Different Term Options
Set Default Finance Charge for New Customer Cards
Set Default Finance Charge on an Existing Customer Card
Set Finance Charge on an Existing Invoice
Collecting Payment Finance Charges

Background

Finance Charges, Discounts, and when Payment is Due are covered under a broader heading called "Terms" and can be modified in Selling Details.

Finance charges are amounts added to an outstanding balance as a penalty for late payment. A finance charge is added to a customer’s statement. The amount paid by a customer to cover the charge is then recorded in the Receive Payments window.

NOTE: Finance charges will never be added automatically to a customer invoice - they only appear on customer statements based on the terms of an invoice.

Discounts for early payments are amounts taken off of an invoice as a reward for early payment.

NOTE: Discounts will only be seen when entering the Receive Payment transaction.

About Finance Charges

If you assign finance charges to balances that aren't paid by their due date, finance charges will be assessed beginning the day after the due date. Due dates and finance charge amounts are determined by the selections you make in the Late Payment Monthly Charge % field in the Customer Terms Information section of the Selling Details window.

A finance charge amount is calculated by multiplying the customer's overdue balance by 1/30th of the monthly finance charge rate for each day the balance is overdue.

For Example: If a customer's overdue balance is $100 and their monthly finance charge rate is 1.5%, their daily finance charge rate is .05% (1/30th of 1.5%), and their finance charge amount for each day their payment is overdue is $0.05 ($100 multiplied by .05%).

If a customer pays part of an overdue balance during the overdue period — and you use the Receive Payments/Customer Payments window to apply the payment — the finance charge amount that's calculated will be based upon the remaining overdue balance.

Finance charges are calculated when you print customer statements. Finance charge amounts can be printed on customer statements by choosing Add Finance Charges to Amount Due in the Forms Selection window of Print Statements. Finance charges do not automatically show on invoices and are not added to the customer's outstanding balance. This gives you the freedom to decide how you want to deal with finance charges. You can, however, track finance charges yourself in a few ways.

Different Term Options

Payment is Due

These are the types of terms for payment and includes C.O.D. (Cash on Delivery), Prepaid, In a Given # of Days, On a Day of the Month, # of Days After EOM (End of Month), and Day of Month After EOM (End of Month).

Most of these terms are based on the date of the invoice recorded. For example, an invoice that was dated June 15, 20xx would have these terms:

  • C.O.D: Due on June 15, 20xx
  • Prepaid: Due on June 15, 20xx (already paid so this doesn't really matter)
  • In a Given # of Days: However many days you set past June 15, 20xx (ie: 10 Days would equate to June 25, 20xx)
  • On a Day of the Month: This you just choose the day of the month - so if you set the 1st-14th it will be due July 1st-15th, 20xx. If you set the 15th-EOM (End of Month) it will be due from the 15th of June to June 30th 20xx.
  • # of Days After End of the Month: If you set this to zero it will be due on June 30, 20xx. If you set this to anything else it will be the corresponding number of days going forward from July 1st (including into the next year if you set it for 300 days or the like)
  • Day of Month after EOM (End of Month): Will equate to July 1st-July 31st 20xx.

Discount Days

The number of days (based on the date of the invoice) that your customer will receive a discount. This can be 0 if you do not give discounts or any number of days entered in.

For example, if your invoice is dated June 15, 20xx and your discount days is set as 10 your customer will receive a discount automatically (when you apply payment to the invoice) up until June 25, 20xx.

Balance Due Days

How many days from the date of the invoice that the invoice is due to be fully paid. If you asses finance charges it will be based on this.

As an example, if your invoice is dated June 15, 20xx and your balance due date is set as 30 (with terms being In a Given # of Days) then finance charges will be calculated on any payment after July 15, 20xx.

Discount for Early Payment

The percentage that you are going to give off the invoice.

% Monthly Charge for Late Payment

The percentage that you are going to add on to a customer's monthly statement based on the invoice. This is only calculated on a month by month basis and it just adds the same percentage on every month - it does not aggregate.

To Change Default Terms for All New Customer Card Files

This will change the default terms for new customer and lead card files going forward. It will not change card files or invoices that were already created.

  1. Go to the top menu bar and select Setup > Preferences > Sales.
  2. Click on the Terms icon on the lower left corner of the window.
  3. Enter your default terms that will apply to any new cards created in your cards list.
  4. Click OK to save the information.

To Change The Terms On The Customer's Card File

This will change the default terms for new sales associated with the card file going forward. It will not change invoices that were already created.

  1. Click on the Card File Command Center.
  2. Click on Card List.
  3. Highlight the Customer card and select Edit.
  4. Click on the Selling Details tab. At the bottom of this window, you will see the terms for this customer.
  5. After you have made the appropriate corrections, click OK to save the updated information.

To Change the Terms on a Specific Invoice

  1. Go to Setup > Preferences > Security.
  2. Take the check mark out of the first option in the list, "Transaction Can't be Changed; They Must be Reversed".
  3. Open the invoice that you want to change the terms for.
  4. Click on the double gray arrows to the right of the word Terms (in the upper right area of the sale). You will now be in the Credit Terms window for this invoice.
  5. Now enter the correct terms for the customer invoice. Click OK to accept the changes and close the Credit Terms window.
  6. Now click OK to accept the changed information to the invoice.

Collecting Payment on Finance Charges

To book and collect finance charges, you can do one of three things:

  1. The most common way to collect finance charges is when you're entering a customer payment in the Receive Payments/Customer Payments window, enter a finance charge payment in the Finance Charge field found at the bottom of the Receive Payments/Customer Payments window.
  2. Create an entire invoice for the finance charges in the Sales window, then use the Receive Payments/Customer Payments window to enter payments against the invoice.
  3. Add the finance charge amount to the outstanding balance of the open sale, then use the Receive Payments/Customer Payments window to enter payments against the open sale.