Generating Interest in Orion

In order to understand how Orion creates Interest transactions, you must first understand how to set up the system for interest generation.  The program always looks at the Matter record to determine whether or not interest should be generated and at what percent; however , you can set up some system default interest settings that will be automatically picked up by new Client records if set to charge interest.  To set up your system defaults open File Maintenance Manager and choose TOOLS, System Settings.

Enter the default settings you want to use when setting up a Client to be charged interest.  Enter the minimum balance on which interest can be charged, the annual interest rate and the number of days overdue in order to be charged interest. If your state allows it (few do), you may also elect to Charge Interest on Interest.  Note that the first 3 values are “defaults” for Clients and Matters.  The Charge Interest on Interest setting is system-wide and cannot be overridden on a Client level or a Matter level.

When you set up a new Client and choose the option to Charge Interest, the “Annual Interest Rate,” "Charge Interest on Balances Overdue By,” and “Interest Minimum Balance” fields will automatically populate with the values set in the system file.  You may enter different values for the Client if you so desire.

When a new Matter is opened and set to Charge Interest, the values in the “Annual Interest Rate,” "Charge Interest on Balances Overdue By,” and “Interest Minimum Balance” fields will automatically default to those entered on the Client record.  You may enter different values for the Matter if you so desire.

When you are ready to generate interest, you may access the Generate Interest program from either the Billing Manager or the Prebill Manager by clicking the ACTION Button and choosing the Generate Interest option.  The following screen will appear:

Generate Interest Based on Invoice Date of - in this field, enter a date that is at least 29 days since the last time interest was generated. The date entered here is compared to the date used the previous time interest was generated.  When interest is generated, the date entered in this field is saved to a “Last Interest Date” field in the Matter record.  Every time interest is generated (assuming there is AR), the date entered in this field is compared to the value in the “Last Interest Date” field.

Date for Generated Interest Records - the transaction date to use for the interest records that are created.  This date should be on or before the cut-off date you will use for Expense transactions during your Prebill/Bill cycle.

Timekeeper for Generated Interest Records - the Timekeeper ID to assign to each of the interest records.  This field defaults to your Timekeeper ID of FIRM.

Once you click the OK Button, the program goes out and checks for accounts receivable on all Matters where there is not an unposted invoice.  If any accounts receivable is found on a Matter, it then checks the Interest flag on the Matter to see if interest should be charged. Before beginning the interest calculation, the program checks the “Last Interest Date” held in the Matter file (this is a field that cannot be seen by the User) and makes sure that at least 29 days have passed since interest was last generated.  If the minimum amount of time has passed, then it calculates the amount of accounts receivable overdue by the number of days specified in Matter setup and makes sure it is over the “Interest Minimum Value.”  Once the amount of accounts receivable on which interest can be generated has been determined, it is multiplied by the “Annual Interest Rate” value and then divided by 12.  An interest transaction is created with the date specified above and with a code of INT.

For example, the Matter shown in the screenshot is set to be charged an annual interest rate of 18% on balances over 30 days old.  The last time interest was generated on the Matter was 08/01/2012 and there are 3 invoices outstanding on the Matter:


Invoice 11689, dated June 15, 2012              $1,234.90
Invoice 12345, dated July 15, 2012             $10.500.00
Invoice 13467, dated August 15, 2012          $6.250.25

If you run the Generate Interest program and use an Invoice Date of September 1, 2012 and an Interest Transaction Date of 08/31/2012, the program will find AR over 30 days old of $11,734.90 (Invoice 13467 is less than 30 days old so it is not included).  It will then compare the Invoice Date (09/01/2012) to the Last Interest Date (08/01/2012) and determine that 29 days have passed since interest was last generated. The following calculation is then performed:

(AR * Annual Interest) / 12 = Interest Charge

(11734.90 * .18) / 12 = 176.02

An Interest transaction dated 08/31/2012 will be created in the amount of $176.02 and the Last Interest Date in the Matter file will be changed to 09/01/2012.

Troubleshooting

If you have a Matter that is past due but interest is not being charged, there are several things you should check.

    1.    Make sure the Matter has been properly set up for interest generation.  A common mistake is to check the option on the Matter record to Charge Interest but to leave the other interest related fields blank or 0.

    2.    At least 29 days must have passed since the last time interest was generated.  Interest is generated on a monthly basis and not for “portions” of a month.  For this reason, 29 days must pass before interest can be charged again.  This is based on the date the last interest transaction was generated and not your last billing cutoff date.  This is important.  Look at the following scenario:

            It is 08/16/2012.  You are still processing July invoices using a cutoff date of 07/31/2012.  You run the Generate Interest Program and the default date of 08/16/2012 is used as the invoice date and the transaction date.  You select to generate interest.  An interest charge is generated dated 08/16/2012.  You proceed with invoicing.

            It is now 09/05/2012 and you are processing August invoices.  You run the Generate Interest program using the default invoice date of 09/05/2012.  Will interest be generated?  No.  Why?  Because 29 days have not passed since you last charged interest (from 08/16/2012 to 09/05/2012).  Orion is doing exactly as it should and protecting you from overcharging interest.

    3.    Orion will not charge interest on a Matter if there are any unapplied and unposted accounting transactions (PMT, RAP, TAP, CR, WO) on the Matter.

    4.    An interest transaction may have actually been created but you are not seeing it on your Prebill or in Bill Preparation.  This is because you may have used an Interest Transaction Date that falls after the cutoff date you used when printing your Prebills/Bills.  To check this, change your cutoff date in Bill Preparation to a future date and then change the date of the interest transaction using the Global Edit feature.