Finance charges are late fees charged to your customers for overdue invoices. Many businesses charge late fees or finance charges on overdue invoices. This allows business owners to recover costs incurred by carrying unpaid bills on their books. Finance charges are usually calculated on a monthly basis.
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 your finance charge setup. To check this, 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, 2021
Invoice 1:
Transaction Date = January 1, 2021
Due Date = February 1, 2021
Amount = $500.00
Invoice 2:
Transaction Date = March 1, 2021
Due Date = April 1, 2021
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
Ref: https://suiteanswers.custhelp.com/app/answers/detail/a_id/12664/loc/en_US