Another task that falls into the ‘managing receivables’ area of business management is charging finance charges on overdue customer balances. This is a pretty standard practice.
There are a number of decisions that should go into the granting of credit to customers. Which customers should you trust to pay later? Should you require a deposit up front?
When do you invoice? When do you follow up with statements on customer accounts?
What about finance charges on overdue customer accounts?
The answers for these questions will be different for every business. Today, we want to examine the question of finance charges. How do we accomplish this in QuickBooks Online (QBO)?
While QBO has many helpful attributes, assessing finance charges on overdue customer accounts is very cumbersome. Still. It needs to be done. Until there is a better solution (we’ll look at influencing that as well), we have to use the available tools.
First, we need an account for posting finance charge income. A good practice is to make this an Other Income type of account.
Once we have the account, we can create an item for charging the fee.
Unfortunately, from this point on, this becomes a manual process. If you have many customer invoices that fall overdue and need to be figured into the calculation for a finance charge, this will be tedious.
Use a report like A/R Aging Summary (easiest if only a few invoices) or A/R Aging Detail (if many overdue invoices fall on different dates to the same customer). Compute by hand the amount of finance charge to be invoiced to the customer.
Once the amount is known, create a new invoice for each customer needing a late charge. Use the new item. Save the invoice and either send a copy to the customer or create a statement, which should include the finance charge, and send that.
QBO adds new features and updates on a regular basis. If you get their blog notifications, you’ll see a number of improvements each month.
The features that are most requested are the ones most likely to be added. If a more automated solution for customer finance charges is what you need, send feedback.
The more QBO users want a particular feature, the more likely we will see it in an upcoming update.