Late Fee Options and One-Time Late Fee Enhancement

Overview

Late fees have historically been assessed on an invoice and then the late fee accrued for each additional 30 days past due. In many cases this is fine, but a subscriber's unpaid invoice could have the amount of the late fee end up being larger than the invoice itself.

While the late fees are associated with specific invoices, the late fees themselves simply change and do not have an associated date.

New Enhancement: Companies that do accrual accounting or prepare reports for a lender often need to track changes in receivables with date specificity. You can now assess a one-time late fee to each invoice that meets your past due in days + late fee grace period. The late fee is date stamped and can be easily tracked in various reports.

Late Fee Configuration Options

1. Late Fee (Balance Below Minimum)

This is the flat dollar amount that would apply to late amounts less than the Minimum Balance you have set.

For Flat Fee Only: If you want ONLY a flat Late Fee to be applied to past-due amounts (no percentage is ever assessed), you need to set your Minimum Balance at a very high level.

Amount Considerations:

• Choose $3 or $5 if the late fee is to accrue on the invoice for each late period that passes
• If you want to assess only 1 late fee per invoice and have a date stamp on the late fee, you may wish to choose a larger amount

One-Time Late Fee: Check the box to calculate a late fee 1 time for each invoice that meets the past due criteria.

2. Minimum Balance

The Minimum Balance determines whether a Late Fee or a Late Rate (see below) is assessed.

Example Logic:

Let's say your normal Late Rate is 18% (1.5% per month). But on a $100 past-due amount, that would only generate a monthly Late Fee of $1.50—likely not worth the trouble.

So you decide that a $5.00 minimum Late Charge should apply even to smaller amounts. $5.00 is 1.5% of $333.33. So it would be consistent to set your Minimum Balance at $333.33.

• Late amounts less than this amount would be charged the Late Fee
• Amounts greater than this amount would be charged the 1.5% Late Rate
  
  

Common Configurations:

3. Late Rate (Balance Above Minimum)

This is the annual percentage charge applied to any past-due amounts in excess of the Minimum Balance.

See example in Section 2 above for how this works with the Minimum Balance.

4. Net Terms Recurring / Product

The number of days after the invoice date that the invoice is due.

Separate Settings:

• You can set Net Terms separately for Recurring Invoices (billing in advance) vs. Product Invoices (for services rendered)
• If you generate Product Invoices, you can set the invoice to print "Due Upon Receipt" rather than printing a due date

Delta Button: Will update the customer records with the Net terms entered.

5. Late Fee Grace

The number of days Grace period between when the invoice is due and the Late Fee will kick in.

Recommendation: Add at least 15-20 days so that a late fee does not generate when we run the next batch of Recurring Invoices. Rather, it waits until the following Recurring Invoice batch.

Why This Matters: This will avoid unnecessary forgiving of late fees because a payment and a new invoice or a statement cross in the mail.

Important Rule: The Recurring Net Terms + The Late Fee Grace Days Must Be Greater than 31 Days and is recommended to be closer to 40-45 days to avoid generating late fees too quickly.

6. Late Fee Grace Amount

Allows you to establish a floor amount for which a late fee is assessed.

Default: $.99 so there won't be a late fee added to any amount less than or equal to $.99.

You can edit this amount as needed.

7. Late Period

This is used to determine the amount of time to pass for the late fee to accrue.

Example: If set at 30 days, an unpaid invoice will be assessed another late fee when the next invoice batch is run (e.g., a $5 late fee will accrue to $10 on the invoice).

8. Only Calc Late Fee Once?

Check this box to date stamp the late fee that is assessed. This will add only 1 late fee to any invoices that are past due.

Recommended for:

• Dealers doing accrual accounting
• Dealers who need to track changes in late fees

Tracking: Late fees that are generated will also be tracked in the Adjustments Tracking Report.

Late Fee Display on Invoices and Statements

Late Charges do appear on an invoice that you reprint.

For Multiple Invoices: To show a total due for more than one invoice, we recommend that you print a statement.

Automatic Generation: The generation of an automatic Recurring Invoice or Statement will generate late fees if the terms are met.

Cornerstone Processing: When Cornerstone runs invoices, we extract the invoice information to our invoice software. Unpaid invoices appear as "Outstanding Invoices," with invoice numbers listed and the total due (including Late Charges) for all those invoices.

Posting Late Fees

If you do assess late fees and Cornerstone processes your remittances, we would like to have a few guidelines on what to do when we have payments to post that do not include late fees.

Guidelines for "Minor Offenders"

Below outlines what other dealers who charge late fees have us do for subscribers who are "minor offenders":

Payment Arrives Shortly After Late Fee Generated:

• Go ahead and zero-out the late fee so the payment clears the invoice

Customer Pays Invoice and Portion of Late Fee:

• Change the late fee so the payment equals the amount due
• Example: A customer includes $5 for late fees, but the late fee amount has now changed to a higher amount, we alter the late fee to match what is paid

Cornerstone's Approach: In the interest of continuing to save your staff time, within reasonable judgment, we are able to handle most issues. Anything we deem as a larger issue, we'll flag for your staff.

Tracking: All adjustments to late fees are tracked in the Adjustments Tracking Report.

Reports for Late Fee Tracking

Invoice History Report

The Invoice History Report allows the option to show the Late Fee Date on the report so you know when the late fee was assessed.

Available Filters:

• Identify all open/unpaid invoices that have a late fee assessed
• Display Discount Credits with date and amount

Adjustments Tracking Report

Tracks the date that the late fee is manually adjusted.

This provides a complete audit trail of all late fee changes.

Aging Report

The Aging Report will allow for an "As of Date" if you do late fees calculated 1 time.

Benefits:

• Enter a date and look at the aging as of that date rather than as of the date and time you are running the report
• Once you begin calculating late fees only 1 time, the aging report can account for late fees as well
• Any accrued late fees will be counted as of the last date the late fee accrued

Benefits of One-Time Late Fee

• Date Stamped - Know exactly when late fee was assessed
• Easier Tracking - Track changes in receivables with date specificity
• Accrual Accounting - Better for companies using accrual accounting
• Lender Reporting - Meets requirements for lender reports
• Prevents Excessive Fees - Late fee won't exceed invoice amount
• Clear Audit Trail - All adjustments tracked in reports

Need Help?

Still have questions? Contact Cornerstone Holding Co. 847-405-9517 or email us customer.success@alarmbills.com