How is Interest handled in Vision?
KB Article #:
39880
Summary:
How is Interest handled in Vision?
Description:

How is Interest handled in Vision?

Resolution:  Vision handles interest in the following manner:
  • Most firms that bill interest charges to their clients do not expect to receive payment for the interest amount.
  • Because Vision assumes that the interest will not be received, Vision inserts the interest amount on the invoice, but this amount is not recognized on general ledger until the client pays the interest charge.
  • Vision displays the interest amount on Accounts Receivable reports, however, it only affects the general ledger as a memo entry. This process eliminates the step of writing-off interest charges when the client does not pay the interest.
The interest amount can be recorded in one of the following ways:
  • If creating an invoice through Transaction Center, Invoices, the interest amount can be automatically entered in the Interest Invoice Section field in the detail section of this form. The Invoice Sections automatically appears after the Invoice, Date, Project, Task, and Comments are entered. Note: An account number cannot entered for the interest amount because the interest charge will not affect the general ledger until payment of the interest is recognized. OR, can set up the billing terms to automatically calculate interest for the specific project
  • If generating the invoice through Interactive Billing, can set up the interest to be calculated automatically after a certain grace period. To enable interest for a project, go to Billing, Billing terms and select he project. On the Misc. tab, enter the grace period and then interest rate. Once the invoice has past the grace period, the next time an invoice is accepted, interest will be added to the invoice.
Once the invoice is posted, the interest charge appears on the Accounts Receivable Ledger, Aged Accounts Receivable report, and in the Billed-to-date section on the invoice (if the Billing application is installed).
  1. When/if the client sends in the payment for the invoice, will enter and post a cash receipt to recognize the payment. One of two situations can occur:
    1. The client pays off the entire invoice amount, including the interest. If the client pays the interest, then the interest must be recorded as a separate line entry in Cash Receipts Transaction Entry.
    2. In the Cash Receipts, Transaction Entry enter, the reference number, date, bank, and comment for the cash receipt file.
    3. In the detail section of the form, enter one line to record the invoice amount
    4. Enter a second line to record payment of any interest charges.
    5. This needs to be done because Vision assumes that the interest charge will not be paid, so it does not include the interest amount in the invoice total.
    6. When double-clicking in the Invoice field to receive a lookup of open invoices on file, the invoice amounts include interest charges applied to the invoice, however, when the invoice is selected, only non-interest amounts are entered on the detail line.
Example:  Assume a payment for Invoice 0000179 is received. The client is paying off an $800.00 charge for labor and fees performed on the project, and a $200.00 interest charge for late payments. When double-clicking in the Invoice field, the open invoice appears as follows:

Invoice         Date     Project         Task     Amount    Balance
0000179     6/15/97     92005.00         1,000.00     1,000.00

However, when highlight this invoice and click on the Copy button, only the $800.00 charge for labor and fees is entered in the detail line. If the interest charged payment is received, must enter the $200.00 for interest manually. With the interest charge entered, the cash receipts transaction entry form appears as follows:

Description     Invoice         Project         phase     task     account     receipt amt.        interest     retainer
                      0000179     ABC        001     A1A     111.00         800                    
ABC        001     A1A    411.001         200         check

For interest payments, must enter a revenue account (in this case 411.00) and select the Interest checkbox.
 
Note:  That if the full amount of the invoice is entered, including the interest charge, in the first detail line, Vision will consider the invoices to be overpaid.
 
In order for these amounts to be reflected properly in the general ledger and on the project reports, these amounts must split.

After the cash receipt is entered and then posted, all amounts (including interest charges) are reflected in the general ledger and on the project reports properly.
 
  1. The client pays off the entire invoice amount, excluding the interest:
    • If the client does not pay the interest, will record only the actual amount received on the invoice.
    • That is, in Cash Receipts Transaction Entry enter the reference number, date, bank, and comment for the cash receipt file.
    • Then, in the detail section of the form, enter one line to record the invoice amount for fee, labor, expense, and/or unit charges.
Example:  Assume a payment for Invoice 0000179 is received. The client is paying off an $800.00 charge for labor and fees performed on the project. Although a $200.00 interest charge for late payments was included, only the $800.00 due for labor and fees is received. When double-clicking in the Invoice field, the open invoice appears as follows:

Invoice         Date     Project         Task     Amount    Balance
0000179     6/15/97     92005.00         1,000.00     1,000.00

However, when this invoice highlighted and click on the Copy button, only the $800.00 charge for labor and fees is entered in the detail line. The cash receipts data entry form appears as follows:

Description     Invoice         Project         phase     task     account     receipt amt.        interest     retainer
                      0000179     ABC        001     A1A     111.00         800                    

After the cash receipt is entered, post the file. When the file is posted, the $200.00 interest charge still remaining on the invoice is removed from Vision and does not affect the general ledger and project reports.
 
Also see:
 How to add Interest to AR Statements
 
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