The interest key controls the item interest calculation.
The interest key can be entered in the contract account.
If it was calculated in the dunning run, the interest key is stored in the dunning level.
The interest key entered in the item (manually or automatically) has the highest priority.
The interest posting creates an interest document which contains an interest supplement.
The interest supplement contains the items for which interest was calculated, as well as the relevant amounts, intervals, and the interest key. This allows you to identify which factors were used for interest calculation and posting.
The interest key consists of all control parameters for interest calculation and posting:
Parameters for item selection
Reference to a calculation rule
The tolerance days (grace period) is the minimum number of days that must have passed since the due date for net payment of a receivable before interest can be calculated. If the receivable is cleared within the tolerance period, no interest calculation or interest posting can take place.
The tolerance period is not taken into account for interest calculations in the future (such as installment plan interest).
The calculation frequency determines the earliest point at which interest is calculated for an item if interest has already been calculated.
The transfer days refer to the period that it takes a bank to clear a payment and provide the clearing information. This ensures that interest calculation does not take place on a receivable for which payment is delayed by the bank.
The baseline date for interest calculation is Due Date + Grace Period + Transfer Days.
The interest calculation rule contains the parameters for interest calculation:
Dynamic interest rate
Static interest rate
The interest rate depends on:
The reference interest
The analysis period
The interest rates are stored per currency and debit/credit indicator according to the date. They can also be based on a reference interest rate, such as the federal funds rate.
The interest calculation can be carried out on a monthly basis (for example, 2% per month).
The interest calculation method dictates how interest is to be calculated. Most users use the act/365 method, with which the system calculates interest based on a 365-day period.
The Scale Type indicator is used if the interest rate used is based on amounts. For example, you may wish to charge an interest rate of 5% on the first 1000 balance and then 6% for any balance above 1000.
The interest interval can be set to a day, week, month, or year. In most countries, this indicator is set to Year. However, some countries with high inflation rates use Day or Week.
You can select the Calculate Interest indicator when a dunning level is reached.
You can select the Update Key indicator to control the interest processing:
_ – Interest is only calculated, not posted
An organization can send a letter to a customer informing them that they could have charged interest, but opted not to.
1 – Interest is calculated and posted statistically
You do not expect to complete the transaction or collect the interest.
2 – Interest is calculated and posted
The general ledger is updated as a result.