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R
russellg999
November 20, 2023
Question

Late fees charge interest on interest with no option to disable it

  • November 20, 2023
  • 1 reply
  • 0 views

If I set the Late Fees feature to charge 1% daily, I see customer invoices modified with a new line item each day, but the late fee for that line item is calculated by including previous late fees along with the original invoice balance.

 

For example, if an invoice is originally for $100, and a late fee of $1.00 is added, then the next time a late fee is added to that same invoice, it will add 1% of $101.00, instead of 1% of the original $100.

 

There is no way to disable this interest on interest, and my company can't use the Late Fees feature as it works right now because we don't have an agreement with our customers to charge interest this way. (I'm not even sure if it's legal in our state.)

 

There should be an option to enable or disable compound interest as there is in QuickBooks Desktop.

1 reply

G
GenmarieM
November 20, 2023

Welcome to the Community, russell. I can provide you with information about the late fees that won't add up to the original amount of your invoice.

 

Currently, there's no option to disable compound interest in QuickBooks Online. However, I can provide you with a workaround on how to minimize the added amount of the late fees in your invoice. 

 

I recommend changing your Late Fee type from a percentage to a flat fee. Here's how:

 

  1. Go to the Gear icon, then select Account and settings.
  2. Choose Sales, then select Late fees and click Edit.
  3. Change the Type into Flat fee, then enter the amount.
  4. Once finished, click Done.

 

Furthermore, if you want to add service fees to the invoices, you can check out this article for guidance: Manually add service fees to invoices in QuickBooks Online.

 

I'm ready to back you up if you need more help with your invoices. I'll keep the thread open so you can comment back.

R
russellg999Author
November 20, 2023

Thanks, but that's about as much of a "workaround" as if you'd just suggested that my company start charging compound interest. We have agreements with hundreds of customers, and that agreement specifies exactly how they'll be charged for late fees. We can't just switch to a different method because QuickBooks Online doesn't support even the most basic type of charging interest.

 

I'm a developer myself and I'm amazed that someone could build the Late Fees feature and decide that it's perfectly ok to take the easy way out and not add in that extra step to remove existing late fees before calculating the new fee. Each line-item late fee uses the same item that QuickBooks Online created itself, so it certainly knows which line items are late fees. And then to go the extra step of not even disclosing in the UI or documentation that all percentage-based late fees charge compound interest is just the icing on the cake.

 

Add on to that the fact that it uses a simple percentage rate instead of an annual one like QuickBooks Desktop does, and that it doesn't support entering custom values for the Grace Period, or being able to mark the modified invoice as needing to be printed again, or creating a separate invoice for the late fee (all of which are in QBD as well), and you've got a perfectly good feature that some college intern built as a summer project.

 

Thanks a lot.

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