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Apply Penalty Interest to a Single Accounts Rendered (AR)

Daniel Martin
  • Updated

Overview

Penalty Interest allows you to calculate and apply interest to an individual overdue Accounts Rendered (AR) directly from the AR Maintenance screen.

This workflow is used when you want to apply Penalty Interest to a single AR. Penalty Interest is calculated using your firm’s configured rules and once committed, is added to the AR balance as a ledger entry.

This article explains how to calculate Penalty Interest for a single AR, how the calculation period works, when interest is committed, and what to do if you need to correct or reverse it.

Who can do this

  • Users with the Manage Accounts Rendered permission.

Before you start

Before applying Penalty Interest to an AR, make sure you understand the following:

  • Penalty Interest must be enabled and configured at the firm level.
  • The AR must be eligible for Penalty Interest.
  • Penalty Interest is applied directly to the AR - it is not applied through Billing.
  • Penalty Interest is always calculated using compounding interest.
  • Applying Penalty Interest involves saving both the Penalty Interest and the AR. Interest is not committed until the AR itself is saved.

Note
This article covers applying Penalty Interest to a single AR only. Bulk processing, Debtors workflows, and reporting are covered in separate articles.

Eligibility and exclusions (important concept)

An AR must be eligible before Penalty Interest can be applied.

Eligibility depends on:

  • your firm’s practice-wide Penalty Interest settings, and
  • whether the related Party or Matter is included or excluded from Penalty Interest.

If a Party is excluded, Penalty Interest cannot be applied to any ARs for any Matters associated with that Party.
If a Matter is excluded, Penalty Interest cannot be applied to ARs for that Matter, but may still be applied to ARs for other Matters for the same Party.

Party or Matter exclusions override practice-wide Penalty Interest settings.

There is no AR-level override for Penalty Interest eligibility.

Note
This article does not explain how Penalty Interest exclusions are configured. Eligibility is dependent on your firm’s setup.

Steps

  1. Open the Accounts Rendered (AR) you want to apply Penalty Interest to.

  2. In the AR Maintenance window, select Add Penalty Interest (calculator with green + icon), from the transaction options.

    Accounts Rendered Maintenance window showing an open AR. The Transactions tab is selected, displaying existing applied transactions. The Add Penalty Interest icon (calculator with green plus symbol) is highlighted in the transaction options area, indicating where users select it to add Penalty Interest to the AR.

    Result: The Penalty Interest window displays

    Penalty Interest window for an AR, showing the calculation options. The From overdue date option is selected, displaying the calculated date range used for interest. The Interest due amount is shown, along with the editable Penalty Interest narration field and Save & Close button used to save the Penalty Interest and return to the AR Maintenance window.

  3. In the Penalty Interest window, choose how to calculate interest:

    • To use the system-calculated period, leave From overdue date selected.
      • The calculated date range is shown on this line.
    • To apply interest for a specific period, select For period, then select the From and To dates.
      • Update the default Penalty Interest narration, if required. 

    Note  
    By default, Penalty Interest is calculated from the day after the invoice due date, or the date interest was last charged, through the end of the previous day. The Penalty Interest window shows the exact date range being used.

  4. Select Save & Close to save the Penalty Interest and return to the AR Maintenance window.
  5. In the AR Maintenance window, confirm the Penalty Interest now appears in the default Transactions tab.
  6. Select Save & Close to commit the Penalty Interest to the AR.

Result

After the AR is saved:

  • The Penalty Interest is committed as a transaction on the AR.
  • The AR balance is updated to include the Penalty Interest.
  • The updated AR total is reflected in the Financial Summary for the Matter.
  • The Penalty Interest is visible against the AR in the Matter’s AR tab.
  • The Penalty Interest appears as a ledger entry in the Matter’s Trust tab.

 

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