FICA Item Interest calculation

[ivor_martin]

Hello colleagues,

We have configured item interest calculation as follows and are not getting expected results.

Calculation Rule configuration:

• Calculation method: 3 act/365
• The Rate is set to 1% for Interest interval 1 (Month)
• Month rule: No Interest Calculation on a monthly basis
• Scale Type : No staggered Interest rates
• Checkbox for "Interest per day" is turned on

Interest Key configuration:

• Tolerance : 1 day
• Interest frequency: 1 day

Open item amount 2.000 JOD, Due date Feb 3rd 2018

Interest calculation date (upon clearing: April 11th 2018)

Based on my understanding of the documentation, the interest should calculate as follows:

2.000 X 0.01 <no: of X <days> (67) /365 = 0.0037 (or close to 0.004)

However, the system calculates 0.067

Perhaps I'm misinterpreting how the calculation should work.

Any insights will be helpful.

Thanks and regards,

Ivor Martin

[AmlanBanerjee · Accepted solution]

Hi Ivor,

The Interest rate that you have configured is against a monthly interval.

So ideally the interest rate for calculation would 0,01*12=0,1201 per annum (non-compounded equivalent)

Hence the interest calculation would have been 2*0,1201*(67/365) = 0,044

Can you check if the interest rate has any premium part or not which may be adding up to the interest rate for the calculation part;

Thanks,

Amlan

[ivor_martin]

Hi Amlan,

Thanks a lot for the prompt response.

When you say "ideally", do you mean based on my configuration, the calculation you have shown is how SAP should make the calculation?

Please clarify.

Also, I double-checked the Premium configuration - there is no premium configured.

Please let me know if you have other suggestions.

Thanks in advance.

Regards,

Ivor

[AmlanBanerjee]

Hello Ivor,

'Ideally' refers to the Standard SAP calculation that should have happened as per the parameters that you have configured.

As you configured, 1% interest monthly, then it becomes 12.01 % interest per year. (Non-Compounded)

Also, as you have activated Checkbox for "Interest per day", the interest is calculated for a day first and then multiplied by the number of days in arrears (based on tolerance days set in SPRO)

So Interest calculated for 1 day = 2*(12.01/100)*(1/365)=0.0006580

Now, as the clearing of the receivable has not happened b/w the tolerance days, so the number of days would be from 4th Feb'18 to 11th Apr'18=67.

Hence total interest for the period = 0.0006580*67=0,044

However, the interest that you are getting is 0,067.

So there is some discrepancy either with the percentage rate or any parameter is also activated which is not mentioned in your post.

Thanks,

Amlan

[ivor_martin]

Hi Amlan,

Thanks again for your additional feedback.

The only other setting I can see is in Posting area 1084 (Additional Functions for Interest calculation).

The setting for "Calculate Interest on Net amounts" = set to "X" (for Yes).

Please let me know if this could be influencing the calculation.

Thanks and regards,

Ivor

[ivor_martin]

Hi Amlan,

I think the problem was solved by disabling the "Calculate Interest per day".

Because of the small amounts (some of them down to 4th decimal places) some interest calculation per day was zero (we have 3 decimal places in this implementation).

It looks like its calculating correctly now. I'll let you know if there's anything else to share.

Thanks a lot for your help.

Regards,

Ivor