NetSuite computes the finance charge using the following formula:
(Annual Rate / 365) x age of invoices x amount of outstanding invoices being assessed
Age of invoices is counted from Transaction Date or Due Date, depending on the finance charge setup. i.e, by navigate to Setup > Accounting > Finance Charge Preferences.
For a customer with multiple overdue invoices subject for assessment, finance charge is computed for each invoice. The sum of finance charge for each invoice is the total finance charge assessed for that customer.
Finance Charge Preferences:
Annual Rate = 12%
Grace Period = 0
Minimum Finance Charge = 0.00
Assess From = Due Date
Assessment Date = July 27, 2023
Invoice 1:
Transaction Date = January 1, 2023
Due Date = February 1, 2023
Amount = $500.00
Invoice 2:
Transaction Date = March 1, 2023
Due Date = April 1, 2023
Amount = $1000.00
Finance charge is computed as follows:
Invoice 1: (12% / 365) x 176 days x $500.00 = $28.93
Invoice 2: (12% / 365) x 117 days x $1000.00 = $38.47
Total finance charge = $67.40