How to Assess Finance Charges in QuickBooks Desktop?

Hi Harold,

QuickBooks provides the flexibility and control over Finance charges and late fees applicable to the customer invoices, and a user or the owner of the business can decide what would be the percentage going to be added in customer invoices.

Before we know the steps of calculating the Finance charges and how-to asses them in both QuickBooks Desktop and QuickBooks Online, it is important to know about the Finance Charges.

What is a Finance Charge?

Finance charges are the whole of all charges considered, payable straightforwardly or in a roundabout way by the individual to whom credit is expanded, and forced specifically or by implication by the lender as an occurrence to the augmentation of credit. The measure of the charge incorporates late charges and different charges coming about because of or emerging out generally installment, wrongdoing, default, or another like event. Fund charges are directed by state and government laws.

Managing unpaid balances and late fees from the customer invoices and to track them is very easy in both the versions of QuickBooks either it is Desktop or Online.

QuickBooks Desktop Finance charge preference:

Before the user start the assessment of Finance charges it is mandate to change the settings, the steps are below:

1. User need to login as an Admin in the company file.
2. Click on Edit menu and click on
3. Go to the Finance charge, then click on Company preferences.
4. Here user need to fill in the fields named Annual Interest Rate (%), Minimum Finance charge and Grace Period in days.
5. Next the user needs to select user to track income from finance charges, under Finance Charge account drop down menu.
6. (Optional) If user do not want QuickBooks to assess finance charges on overdue finance charges, clear the Assess overdue finance charges 
7. User need to select the correct radio button for due date or invoice/billed date to indicate when user wants QuickBooks to calculate finance charges.
8. Now click OK.

Assess finance charge:

        To assess finance charges user, need to follow the steps below:

1. Click on Customers menu, then select Assess Finance Charges.
2. Select the appropriate Account receivable account. Note that QuickBooks displays the Account receivable Account field ONLY when your Chart of Accounts contains more than one Account receivable.
3. Now set the Assessment date.
4. Select the customers and jobs you want to assess finance charges for.
5. Select Assess Charges. 

Prevent a finance charge from being assessed on an invoice

There are two methods available if the user wants an invoice to be excluded from a customer balance when assessing finance charges.

Option 1: Create a job that’s excluded from finance charges

1. Click on Customers menu, then select Customer Center.
2. Select the customer, then choose Add Job from the drop-down at the upper left.
3. In the Job Name field, enter Customer Name – No FC. Select OK.
4. Edit the invoice and change the customer to the job you just created.
5. Select Save & Close.
6. Click on Customers menu, then select Assess Finance Charges.
7. Now the user can select the invoices he wants to apply finance charges to without choosing the new job’s invoice.

Option 2: Create a second Accounts Receivable that can exclude from finance charges

1. Go to the Company menu, then select Chart of Accounts.
2. In the Chart of Accounts window, right-click anywhere, then click on New.
3. Select Other Account Types, then select Accounts Receivable from the drop-down.
4. Select Continue.
5. In the Account Name field, enter Accounts Receivable – No FC.
6. Select Save & Close.
7. Edit any existing invoices the user like to exclude from finance charges, then select the new Account receivable account.

1. • When the user creates or edit invoices, they can now choose which Account receivable account they like to use.
   • When user go to the Customers menu then select Assess Finance Charge, the user will have the option to select which Account receivable user want to use to assess finance charges.

QuickBooks Online Finance charge preference:

1. Go to the Gear icon.
2. Select Products and Services.
3. Click New.
4. Select Service.
5. Enter the name, such as finance charges.
6. Enter the price/rate.
7. Select the Income Account to track how much user receive in finance charges. If the income account is not listed, user can just type the name, press Enter, and complete the New Account interview: Income for the account type and Service/fee income for the income account type.
8. Click Save.