Wednesday, March 28, 2012

QuickBooks: Finance Charges

QuickBooks uses the following equation to calculate finance charges:
Number of days past due x balance due x rate/365

For example, if on June 1st you assess a finance charge for a customer whose terms are Net 30. QuickBooks creates an invoice for the amount of the finance charge. If your customer does not pay by July 2nd and you added terms of Net 30 to the finance charge invoice and selected the "Assess finance charges on finance charges" checkbox, QuickBooks calculates interest on both the original overdue amount and on the finance charge amount. If you did not select this checkbox, QuickBooks calculates finance charges only on the original overdue amount.

IMPORTANT: Laws vary about whether you can charge interest on overdue interest payments. Confirm with the appropriate jurisdiction that you are in compliance with that jurisdiction's lending laws.

Have the QuickBooks Administrator set up QuickBooks to assess finance charges.
Edit -> Preferences -> Finance Charge -> Company Preferences

When you assess finance charges, QuickBooks automatically creates a finance charge invoice

1. From the Customers menu click Assess Finance Charges. A new screen will appear.

2. Select the customers and jobs for which you want to assess finance charges.

Important: Customers and jobs marked with an asterisk (*) have credits in the form of payments or credit memos that you have not yet applied to an invoice. The overdue balance shown in the Assess Finance Charges window does not reflect these credits.

3. (Optional) Change finance charge amounts by typing over the amounts shown in the Fin. Charge column. To change the interest rate, click Settings and enter the new rate.

4. (Optional) If you plan to print the finance charge invoices to send to customers, select the Mark invoices to be printed checkbox, and then print from the print forms queue.
If you send statements, leave this checkbox cleared. The finance charges will be included the


Devon Earish said...

Its a good idea to know quickbooks finance charges. I think that it would help you to be prepared on how much to pay. I know that its necessary to be prepared in everything for the business.

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