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Law Office of David Hellman

Problem with Interest Accruing After a Write Off

Posted By

I'm not sure what's going on or how best to describe it but hoping someone can help! We have interest set at 10% compound, billed after 30 days. Sometimes a client will pay their bill after the 30 days is up, but will only pay the principal and not the interest charges. In that case, we just write off the interest. But for some of our clients, interest is continuing to accrue even though the principal is paid and the interest accrued has been written off. To give an example:

Client was billed $2290. She did not pay on time, so on her next bill, there was a past due charge for $2290 plus an interest charge of 20.08. She then paid the original amount of $2290. I did a write off for $20.08 so her balance was $0. The next month, no new charges, she had a bill for $4.39 in interest. I wrote it off again. This month, she has a bill for $0.25 in interest. Her pre-bill shows that the "total overdue" is $15.69 but when I go to the A/R screen, it shows she has a $0 balance due.

1) How can I stop this from happening and correct it?

2) How can I change the template so that we have simple interest instead of compound interest? I think this will solve it in the future but I'm not sure how to change it so that the change affects all our clients (who are all on the same billing settings).

  • 0
    I just want to be very exacting here. When you say you are "writing off" the interest. How are you doing that? Because you can't write off the interest until it is billed. So are you billing it, and then entering a write off?

    Make sure that both the payment of 2209 and the write off of the interest has been applied to an invoice, and not to a future invoice.
  • 0
    In Setup > General go to Rules. There is a box that say Payments entered after the last bill date calculate interest on the next bill. That should be unchecked. To change from compound to simple interest make a backup. Then open the client list and go to the template client. Change interest to simple and save. Then click on export icon - piece of paper with arrow pointing out. In left column Fields) right click and choose none. Then check Interest Type. In right column (Export to) right click on choose All. This will change all OPEN matters. Click Export. Clients that are closed or inactive have to be changed singularly or when re-opened.
  • 0 in reply to Nancy Duhon
    Hi Nancy,

    I am using the "write off" option on the payment screen. I am doing this after the bill has been generated, since the bill was sent and the client chose to pay only the original balance and not the interest balance.

    I'm not sure if, when I originally entered the write-off, I specified which line item the write-off would apply to (under the Invoice Distribution section the little box that says "not yet applied" may have had the amount sitting there, rather than having applied the write-off to the interest line from that particular bill). But it's not more complicated because a bill was generated the next month that also showed interest, and that interest was then written off as well.

    I've tried to correct this by going back and making sure all write-offs were applied to the interest line of the bill, but no matter what I do nothing is zeroing out. I think I'm just going to "pay" the bill to get rid of these small interest charges, but this doesn't help me avoid this in the future. Any further advice is appreciated!
  • 0 in reply to Law Office of David Hellman
    Sorry, "now" more complicated, not "not more complicated"
  • 0 in reply to Law Office of David Hellman
    Just now, when I printed a bill for this client, it says that her balance due is $20.08. But when I got to the A/R screen to enter a payment or write-off, it only shows she owes $0.49 in interest. I wrote off the interest again, created a new bill, and it shows $20.08. But the A/R screen shows a $0 balance. How can the A/R screen show a different balance than the bill??
  • 0 in reply to Law Office of David Hellman
    David, I think the account may need to be rebuilt. (This is not unusual after fighting with an account for a bit.)

    If you go to the A/R Transactions Listing for that Client, is the balance in the bottom right correct?

    If so, then make a backup (this is the ONLY way to get back to square one if the rebuild does not work, so please make sure to make the backup), then click on File, Data Verification, middle section Rebuild A/R Balances, ONLY rebuild the one account.

    See if that helps the bill come out correct.

    If the balance is not correct in the A/R listing, or the rebuild does not work, you would be looking at a data repair, which will start to cost you. But let's just try this first.

*Community Hub is the new name for Sage City