When a lessee or borrower does not pay an invoice on or prior to the due date, Oracle Lease Management can assess a penalty. There are two ways to calculate the penalty. The first is a one-time fee charged after a grace period, and the second is an interest charge on the payment. You can choose to use one or the other, or both.
After Oracle Lease Management assesses the late charge or late interest charge, it sends the amount to Oracle Receivables, which then sends an invoice to the lessee/borrower.
The setup process uses these terms:
Late Charge Policy: Grouping of terms and conditions for late charges and late interest charges.
Late Charge: One-time fee assessed to a lessee/borrow for not paying an invoice.
This can be a flat-fee or a percentage of total open invoices past due.
Late Interest Charge: An interest charge on a late payment.
Adder: The amount charged over the index rate. For example, if the index rate is prime, and you are charging prime plus 1%, then 1% is the adder.
Interest Type: This is either Fixed or Variable
7.9.1 Create Late Policies
You can create a late interest policy, a late charge policy, or a late interest and late charge policy. These sections outline the steps:
Section 7.9.1.1, "Create Late Interest Policy"
■ Section 7.9.1.2, "Create Late Charge Policy"
Prerequisites
Your interest rates must be set up. See Section 7.8, "Set up Interest Rates".
Responsibility
Lease Super User, Accounts Controller or Operations Manager
Module
Oracle Lease Management
Navigation
Setup > Receivables > Late Policies
7.9.1.1 Create Late Interest Policy
Optional
Late interest is calculated for past due invoices when the payment is received. This rule assesses late interest to the payment, which can be either fixed or variable.
Late interest computation uses this formula:
Late interest = ((Invoice Amount * Rate)/Number of days in the year)* Days Late Where
Days Late = Date Invoice Paid - Due Date of the Invoice Or
Days Late = Date Item Paid - (Due Date of Invoice + Grace Period)
If the late interest is less than the minimum late interest, no interest is assessed. If the late interest is more than the maximum, then the maximum amount is used.
Interest is assessed using the “rate type” associated with the policy. If the rate type is fixed, use the defined rate. If the rate is variable, use the index code associated with the late charge product to look up the rates from the rate table. The rate is then equal to the rate from the index plus an adder.
The following steps describe how to set up late interest rules by defining the parameters on the setup pages.
Steps
1. Click the Create button.
2. In the Create Late Policy page, enter the Name.
For example, Germany_lease.
3. Choose the Location from the list of values.
For example, Germany. (This could be a state or a country.) 4. Enter the Description.
For example, Late Charges.
5. Select a Late Policy Type from the drop-down list.
Choices include Late Charge, Late Interest, and Late Charge and Late Interest.
If you choose Late Charge, then complete only that section. If you choose Late Interest, then complete only that section. If you choose both, complete both sections.
6. In the Late Interest section, enter the Maximum Interest.
This is the maximum amount assessed as a late interest charge.
7. Enter the Minimum Interest.
This is the minimum amount assessed as a late interest charge.
8. Select the Rate Type from the drop-down list.
Choices include Fixed Rate or Variable Rate. If you selected Fixed Rate, then enter the Late Interest Rate (%). For example, 11%.
If you selected Variable Rate, then select the Index Code from a list of values (these are the Interest Rates you set up earlier). Then enter an Adder Rate, for example, 1.0.
9. Enter the Grace Period. For example, 10 days.
10. Enter the Minimum Balance. For example, $10.
11. Click the Create button.
12. A page displaying the list of Exempt Billing Types appears. Select any Exempt Billing Types.
13. Click the Submit button.
7.9.1.2 Create Late Charge Policy
Late charges can be a flat fee or a percentage of the total invoices past due. For a contract, if the late charge is a flat fee, no computation is needed. If, however, the late charge is a percentage of the total due, then you must compute the charge.
Compare the computed charge with the minimum and maximum charge. If it is less than minimum, use the minimum, or if it is more than the maximum, use the maximum.
Late charge calculation: %*Amount Due
These steps describe how to set up late charge rules and define the parameters on the setup pages.
Steps
1. In the Late Charges section, select the Late Charge Type.
Choices include Fixed Amount or Percentage.
2. If you choose percentage, enter the Late Charge Rate (%).
For example, 10%.
3. If you choose fixed, enter the Late Charge Amount.
For example, $25.
4. Enter the Grace Period.
The Grace Period is the period during which a late charge is not assessed. For example, 10 days.
5. Enter the Maximum Late Charge.
This is the maximum amount that can be assessed as a late charge.
6. Enter the Minimum Late Charge.
This is the minimum amount that can be assessed as a late charge.
7. Enter the Minimum Balance.
If the amount due is less than the minimum amount, no late charge is assessed.
8. Click the Create Late Policy button.
9. A page displaying the list of Exempt Billing Types appears. Select any Exempt Billing Types.
10. Click the Submit button.
7.10 Define Cash Search and Application Rules
These implementation topics describe the setup of Oracle Lease Management cash search and application rules:
■ Section 7.10.1, "Define Invoice Search Rule"
■ Section 7.10.2, "Define Cash Allocation Rules"