Finance charges let you calculate interest on customer balances that remain unpaid past the due date. Business Central handles this through Finance Charge Terms, which define the interest rate, grace period, minimum charge, and calculation method. Once assigned to a customer, these terms are used whenever you run the Create Finance Charge Memos batch job.
Finance charges differ from reminders. Reminders notify customers of overdue amounts and can include flat fees. Finance charges specifically calculate interest and generate a separate document, the finance charge memo, which the customer must pay.
Create Finance Charge Terms
- Search for Finance Charge Terms using
Alt + Q. - Select New.
- Fill in the following fields:
| Field | Description |
|---|---|
| Code | A short identifier, e.g. 1.5M or STANDARD |
| Description | A readable label, e.g. 1.5% per month on overdue balances |
| Interest Rate % | The interest rate to apply |
| Interest Period (Days) | The period the rate applies to, typically 30 for monthly or 365 for annual |
| Grace Period | A date formula for how many days past due before interest starts, e.g. 5D |
| Minimum Amount (LCY) | A minimum charge amount, memos below this threshold are not created |
| Additional Fee (LCY) | A flat fee added to every finance charge memo |
| Interest Calculation | Choose Closed Entries to charge on paid entries, Open Entries to charge on unpaid entries only, or All Entries |
| Interest Calculation Method | Average Daily Balance or Balance Due |
Example Finance Charge Terms
| Code | Description | Interest Rate % | Interest Period (Days) | Grace Period | Min. Amount |
|---|---|---|---|---|---|
| 1.5M | 1.5% monthly | 1.5 | 30 | 5D | 10.00 |
| 12Y | 12% annual | 12 | 365 | 0D | 25.00 |
| FLAT | Flat fee only | 0 | 30 | 10D | 0.00 |
The FLAT example generates a memo with an additional fee but no interest, useful if your company charges a fixed late payment fee rather than percentage-based interest.
Add Text to Finance Charge Memos
You can configure text that appears at the beginning and end of the finance charge memo document.
- On the Finance Charge Terms page, select the term and choose Beginning Text or Ending Text from the ribbon.
- Enter the text that should appear on printed or emailed memos.
Assign Finance Charge Terms to Customers
- Open the Customer Card for the relevant customer.
- Navigate to the Payments tab.
- Set the Fin. Charge Terms Code field to the appropriate code.
Customers without a finance charge terms code will be excluded from the Create Finance Charge Memos batch job.
Create and Issue Finance Charge Memos
Once finance charge terms are assigned to customers, the process to generate memos runs in three steps.
Step 1: Create Finance Charge Memos
- Search for Finance Charge Memos using
Alt + Q. - In the ribbon, select Create Finance Charge Memos.
- In the request page, set the Finance Charge Date, this is the date used to calculate interest.
- Set a Posting Date.
- Choose whether to process all customers or a filtered selection.
- Select OK to run the batch.
Business Central creates draft finance charge memos for all qualifying customers with overdue entries.
Step 2: Review the Memos
- On the Finance Charge Memos list, open each memo to verify the calculated amounts.
- Lines show the individual overdue entries, interest days, and calculated interest.
- You can manually delete lines or adjust amounts before issuing.
Step 3: Issue and Send
- Select one or more memos on the list.
- In the ribbon, choose Issue.
- After issuing, use Print or Send to deliver the memo to the customer.
Issuing the memo posts the finance charge to the customer ledger as an open entry that must be paid.
To set up reminders for overdue invoices, a separate but related feature, see How to Set Up Reminders in Business Central.