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Finance charges: how they're calculated

How Allmoxy works out finance charges on late balances: the rate, which invoices earn them and when, the monthly Finance Charges invoice, the threshold, and worked examples.

Finance charges are interest on invoices that are past due. You set an annual rate in Settings > Admin > Financial, Allmoxy applies one twelfth of it each month to every open invoice past its due date, and on the last day of the month it adds the result to one Finance Charges invoice per customer.

Applies to: shops that charge interest on late balances. Settings need the Manage Financial Settings permission.

In this article

Turn on finance charges

  1. Go to Settings > Admin > Financial.
  2. Under Financial Order Settings, enter your Default Finance Charge Interest Rate as an annual percent.
  3. Set Interest Accrual Method to End of Month Balance.
  4. Set the Interest Accrual Threshold if you want small charges skipped.
  5. Click Save.

To charge a particular customer a different rate, edit the company and set Finance Charge Interest Rate. Otherwise the shop rate applies.

Which invoices earn finance charges

  • Order invoices start earning once their due date has passed: the charge date plus the grace days on the customer's payment term.
  • Finance charge invoices and other charges earn as soon as their charge date passes. Unpaid finance charges earn finance charges, so a balance that's left alone compounds.
  • Credit memos, card fees and bounced payment fees never do.

How much is charged

Each month, every open invoice past due earns balance x annual rate / 12.

  • A $1,000 invoice past due at 13% a year: $1,000 x 0.13 / 12 = $10.83 for the month.
  • A $25.76 balance at 13%: $25.76 x 0.010833 = $0.28.

Any charge at or under your Interest Accrual Threshold is skipped for that month. It isn't saved up. For example, with a $10 threshold, a $6 charge for the month is skipped.

The monthly Finance Charges invoice

On the last day of the month, each customer's charges become a single invoice named Finance Charges, and the Finance Charge Created trigger runs. Build a trigger on it to email the customer. See Email invoices and payment reminders automatically.

Remove a finance charge

Open the Finance Charges invoice and click Void This Invoice, or give the customer a credit memo for the amount. See Use credit memos, account credit and write-offs.

Things to know

  • Make sure every customer has a payment term, or that you have a default term. Finance charges use the term's grace days to decide when an invoice is late.
  • Use End of Month Balance. If your account is set to Daily Balance, contact support before relying on the amounts.

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