The method to calculate late fees on past due invoices incorporates the new approach of date stamping the late fee amount. BillQuick Online calculates the late fee based on the date you choose in the Invoice Review screen for the outstanding balance or invoice amount. You can record the late fee payments separately in the Payment screen and then view several reports, such as Account Transaction and Cash Receipts Journal.
The following example clarifies the process:
January 1, 2021: You generate an invoice #1005 for $1000 for Project A. The project is set to charge 1.5 % interest per month on past due invoices. The grace period is set to 45 days.
February 15, 2021: This is the 45th day since the invoice was generated and therefore within the grace period. User opens the Invoice Review screen and brings up invoice #1005. You calculate the late fee for this invoice by setting the ‘Calculate Late Fee Up To’ date to February 15, 2021 and clicking Calculate Late Fee. This results in zero late fee since it is within the 45-day grace period. Therefore, total owed on invoice #1005 = $1000
February 16, 2021: This is the 46th day since the user generated the invoice. User opens the Invoice Review screen and brings up the invoice #1005. You calculate the late fee for this invoice by setting the ‘Calculate Late Fee Up To’ date to February 16, 2021 and clicking Calculate Late Fee. This results in a late fee of $23 ([$1000 x 1.5 x 46] / [100 x 30]). Therefore, total owed on invoice #1005 = $1000 and on LF-1005 = $23.
July 20, 2021: This is the 200th day since the user generated the invoice. You open the Invoice Review screen and bring up the invoice #1005. You calculate the late fee for this invoice by setting the ‘Calculate Late Fee Up To’ date to July 20, 2021 and clicking Calculate Late Fee. This results in a late fee of $100 ([$1000 x 1.5 x 200] / [100 x 30]). Therefore, total owed on invoice #1005 = $1000 and on LF-1005 = $100.
July 31, 2021: Client makes a total payment of $800 after receiving the July 20 statement. The payment is applied as:
$700 towards principal = Invoice # 1005
$100 towards late fee = Invoice # LF-1005
August 19, 2021: You get ready to generate a new invoice statement. This is the 230th day since the user generated the first invoice. You open the Invoice Review screen and bring up the invoice #1005. You calculate the late fee for this invoice by setting the ‘Calculate Late Fee Up To’ date to August 19, 2021 and clicking Calculate Late Fee. Considering the payment made on July 31, the late fee amount would be:
Late Fee = ($1000 x 1.5 x 230) / (100 x 30) - $100 = $15
Therefore, total owed on invoice #1005 = $300 and on LF-1005 = $15.
It is better for the client to pay off the late fee invoice before paying the original invoice amount (principal amount).