QuickBooks Finance Charge Calculation

Question:

I am doing statements and the finance charge in Quickbooks doesn't match what my math says they should be. They seem slightly higher. Does QB go by the actual day or by month. I am going by month.

Please Help!

Answer:

First of all I love the question. You Ma'am are an accountant! How many people would have just let the "computer" do the math. Um, just about everyone. "Trust but verify" as my mother used to say.

So with that in mind: How does Quickbooks calculate the finance charge interest?

Equation Used by the software:

Number of days past due x Balance Due x rate/365

However, you should know that there are some user selected options when calculating finance charges. First, you can choose whether to assess finance charge on top of finance charges or only on the original overdue amount. Second you can calculate the finance charge from either the due date or the invoice/billed date. These changes are made on the Finance Charge Preferences screen, which is found under the "Edit" menu after selecting "Preferences"

Just a note - Remember that the whether finance charges can be assessed and the rate at which they can be applied are a matter for state and local law. Please check with a local attorney or accountant before arbitrarily adding them to invoices.