- How is Interest Calculated?,
- Enable Interest for Client,
- Generate an Interest-Only Invoice,
- Temporarily Delete or Adjust Interest on an Invoice?,
How is Interest Calculated?
TimeSolv uses both compound and simple interest.
In the case of Simple, interest will always be calculated against the principal balance amount.
Whereas in the case of Compound, interest will be calculated against the total balance amount. In short, if interest is unpaid, your clients will be charged interest on top of interest because it is calculated on the balance owed. For example, if your invoices give a 30 day grace period, then no interest is calculated within the first 30 days. On day 31, it would start to calculate interest on the unpaid balance owed at the percentage that you have assigned it.
Interest is calculated based on the percentage you assign (please see this article on how to turn interest on and how to assign that percentage). Interest is assigned at that percentage for anything that is due over their grace period time.
Enable Interest for Client
If the client already exists in TimeSolv, first change the firm-level settings to apply interest to all future clients, and change the interest settings on each existing client at the client level.
Note: this would be for companies that charge interest for all clients.
TimeSolv uses compound interest, as opposed to simple interest. Compound interest is based on the principal amount and the interest that accumulates on it in every period. In short, your clients will be charged interest on top of interest.
Click on Clients>Settings>Invoice Settings.
Apply Interest? - Enable.
Interest Rate - interest rate is based on an annual percentage rate. As an example, if you were to charge a 5% annual interest, you would enter 5 in this field. Or, if you wanted to charge 1.5% monthly interest, you would type in 18 (because 1.5 * 12 months of the year = 18).
Interest Type - in the case of Simple, interest will always be calculated against the principal balance amount. Whereas in the case of Compound, interest will be calculated against the total balance amount (including the interest).
Grace Period (days) - This is the amount of provisional time you will allow the client to make a payment beyond the due date before you begin to charge interest.
Payment terms - interest will not start accruing until the grace period plus specified payment terms days have run their course.
Payment Terms Text - will automatically pre-fill with whatever Payment Terms are selected. But this can be customized to suit your needs. This text box is the only place for you to notify your client what the payment terms are, so if you wish you can write ‘Please pay immediately’ despite having a payment term set up in your back office.
Generate an Interest-Only Invoice
- To generate an interest-only invoice, users first need to ensure they have interest enabled under the Client-level. This is achieved under Clients>Settings>Invoice Settings.
- Now enable the Enable Interest Only Invoices checkbox under Invoices>Settings>General.
Once all the above settings are in place, generate a draft invoice against the relevant client-matter.
An interest-only invoice should be generated if the invoice fits the client-level defined interest rules.
Temporarily Delete or Adjust Interest on an Invoice?
Note: TimeSolv uses compound interest, as opposed to simple interest. Compound interest is based on the principal amount and the interest that accumulates on it in every period. In short, clients will be charged interest on top of interest.
Note: The Interest tab will only be shown for invoices that have interest calculated in them.