Generating Financial Charges

Generating Financial Charges

Before closing the month, it is a good idea to create financial charges so they appear in the correct month.  Financial charge journals are generated for financed clients. This option is found under Actions in the Taskbar Menu in the Accounting Module. Clients can be set up to be charged daily from the date of the sale or from the date the charge became due and are now overdue.  When this Action is selected, a screen will display the proposed financial charge and a selection of clients that could be charged.  All charges are displayed for checking purposes before generation and can only be edited before hitting the Generate Journals command.

Financial Charges are created for accounts that owed anything during the period chosen i.e. outstanding monies might have been paid by the end of the month but they still would have been outstanding during period you are electing to create the charge for.  Discretion needs to be used at the time of creating the charges as to whether or not you want to actually charge for the amount that was outstanding during the period.

Calculation of financial charges is based on
i. The date of the sale in Livestock and
ii.  How the client ledger is set up in Accounting i.e. for daily or overdue charges. 

Payment is dictated by the number of days set in the Sale Type but can be individually managed for each specific Vendor/Purchaser in the Address Book or for each specific sale in Vendor/Purchaser Control.  Default in Livestock will rely on what is set in the sale but if you wish to extend or reduce this amount of time it can be updated in the client record for all sales or just for that particular sale using Vendor/Purchaser Control in Livestock.

Each Sale Type might have a different number of due/settlement days.

Vendors and Purchaser payment or settlement dates are automatically set to the sale type default which will look at the days set in the sale type as above.

These can be individualised either:
a. In the Vendor/Purchaser record in Address Book for all sale types by unticking Default and adding the agreed amount of days:


b. Setting the days for just that specific sale using Vendor Control


If what has been updated in Vendor Control is to become the new norm, don't forget to click on the Copy from Vendor Control button (on the left) to update Address Book so all future sales use this as default.

Step 1: Set the Interest Ledger Accounts

If you have never generated financial charges in Stockyard before, you will need to set the ledger account/s for the charges to be journaled to. 
Idea
Using the Test System to understand the outcome of the whole process is helpful in preventing unwanted/incorrect journals being created.

a. Select ‘System Accounts’ from the ‘Maintenance’ menu and click on the ‘Accounting’ tab.



b.  Enter the ledger code or search your ledger tree for the Interest Received income account.
If you also pay clients’ interest, set the Interest Paid expense account.



c.  Save the settings.

Step 2: Set the Client as Financed in the Ledger

  1. Open the relevant client accounts in the Ledger.
  2. Change the ‘Financed’ field to ‘Daily/Overdue’.
    Select Daily to calculate interest on a daily basis for all transactions in the account. This may include currently undue entries i.e. a sale has just been completed but not yet fallen due.
    Select Overdue to calculate interest on all transactions that have fallen due i.e.  Sales still within their pay-by period will be ignored.
    Info
    To verify the payment due and number of settlement days for each sale type go to Livestock > Sale Types and click into each sale type as these could vary.



c.  Click on Save.

The clients with Financial Charges will appear in the summary screen as follows in the Finance column.




Step 3:  Create the Financial Charge

a. Run the Ageing Debtors/Creditors Report

This helps you understand how long the amounts have been outstanding.  This should be run at month end before closing the month.

b. Go to Actions > Generate Financial Charges



d.  Select your Client/s

  1. If you know the account code for your client, enter it in the space after Accounts and select it when it appears.
  2. If you don't want to use the code or would like to charge several clients in the same ledger category, click on the drop-down to show the ledger tree.
    1. Using Search once you see the Ledger Tree will bring up currently financed ledger accounts.  They will be mixed as Debtors and Creditors, Daily & Overdue. 
    2. To do a more specific search, click on a specific classification and then click Search e.g. Buyers/Vendors etc to bring up one specific group of clients. 
    3. Alternatively, right click on the a classification and confirm you want to select all accounts in the dissection


                  

  1. Select the daily or overdue clients from this list according to your financial charge type.
    1. Hold down shift to click on a range of consecutive accounts.
    2. Hold down control to click randomly to select accounts.

            

Once you let go of Shift/Control, those selected accounts will be displayed in the Charges window.
                  


e.  Set the Charge

Mode: Select either Debtor accounts (creates debit journals) or Creditor accounts (creates credit journals).

Financial Type: Daily Charges or Overdue. 

If you have chosen a group of clients to charge, ensure they all correspond to the charge type.  Verify this information under the Financial Type Column
Journals for the corresponding Financial Types will be generated only if they match the financial charge
      e.g. no journals will be made for the overdue clients in the example below as the charge type is Daily.

Charge Rate (%): Enter the per annum charge rate, up to 4 decimal places.

Lower Limit:  If you want to exclude clients with a low balance enter the lower limit amount in this field.

Dates: Enter the start and end date for the charges to be calculated by selecting from the calendar e.g. weekly/monthly/quarterly dates.

The Journal Batch Date is the date the financial charge journal will be applied to the client accounts.  This defaults to the ‘End Date’. However, you may change it if required.
Info
It is a good idea to create these journals for the last day of the month and before closing the period. 



Click ok to create the charges.

Step 4: Apply Interest 

Once all the charge information has been entered, click OK.  This does not apply the charges yet, but calculates and displays them in a grid for verification.

IdeaUse the Ageing Report to verify the proposed charges. 
Payments that have been made during this period will still attract a charge as amounts were outstanding during the chosen dates.  Zero the charge amount if you do not want that client to be charged.
Clicking in the green charge column for a specific client, allows you edit the charge if need be.


Info
In the example a 5% per annum charge has been set-up to charge multiple clients for a quarterly period. When the ‘Apply Interest’ button is clicked the above grid is displayed.  Journals have not yet been created and you need to verify the accounts about to be charged.

The Ageing Report helps identify charges that might not be valid.

If a payment has been made during the calculated period, a charge will still be created for the days the amount was due before the payment.
e.g. Client A has had an outstanding balance since March. 
You are creating financial charges for the month of May. 
Client A paid on 16 May. 
There will be a charge for the first 15 days in May. 
It is now up to you to use your discretion as to whether or not to add this charge.
If you decide not to add the charge, double click into the Charge column for that client and clear it.
Likewise , if you would like to amend any of the calculations, double clicking into the cell will allow you to edit it.

Step 5: Generate the Financial Charge Journals

  1. Click Generate Journals once you are satisfied that the charges are valid.
  2. The financial charge journals will be created for each client’s account (return to the Ledger to verify).
    Click Cancel to return to the charge set-up screen to make any necessary re-calculations.
  3. Interest journals have now been added to the corresponding ledgers and may be invoiced as needed.


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