How Compound Interest and One-Time Simple interest work

There are two ways you can apply interest to overdue invoices in Sage 50 Accounting. One-Time Simple interest is fixed and accrues after a set number of days, while Compound Interest accrues daily.

1. To create the correct interest rate settings, go to Setup, Settings, Receivables/Customers & Sales.
2. Click Options and place a checkmark to use Interest Charges.
3. You can either use Compound Interest or One-Time Simple Interest to calculate interest charges.
   

 One-Time Simple Interest 

• Enter a percentage and number of days.
• For example, you can charge 2% on invoices overdue by 60 days.

Compound Interest

1. Select to use either Annual Interest Rate or Monthly Interest Rate.
2. Enter a percentage and number of days.

From the monthly or annual rate that you entered, Sage 50 calculates a daily interest rate based on the following formula: Daily Interest Rate = ((1+Annual rate)^(1/365) - 1).

Formula breakdown

• Set the interest charged amount as Y
• Set the month interest rate as x
• Set the annual interest rate as w
• Set overdue days as z
• If you’re using a monthly interest rate, the formula is Y = invoice amount * 1+x^z/365*12 -1
• If you’re using yearly interest rate, the formula is Y = invoice amount * 1+w^z/365 -1