Khkoh: /* Mixing LPI with Normal Invoice Items */

2026-06-21T13:41:02Z

Mixing LPI with Normal Invoice Items

← Older revision		Revision as of 21:41, 21 June 2026
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	This supports customers who have expressly agreed to compounded interest arrangements.		This supports customers who have expressly agreed to compounded interest arrangements.

			== Examples of Late Payment Interest Calculation ==
			The following examples illustrate the difference between non-compounded and compounded Late Payment Interest (LPI) calculations.

			=== Example 1: Non-Compounded Interest ===
			Assumptions:

			* Outstanding invoice amount: $10,000
			* Interest rate: 12% per annum
			* Interest calculated monthly
			* Monthly interest rate: 1%
			* Customer setting: LPI on LPI = No

			Month 1

			Outstanding principal: $10,000

			Interest charged:

			$10,000 × 1% = $100

			Total outstanding:

			$10,000 + $100 = $10,100

			Month 2

			Outstanding principal used for interest calculation: $10,000

			Interest charged:

			$10,000 × 1% = $100

			Accumulated outstanding:

			$10,100 + $100 = $10,200

			Month 3

			Outstanding principal used for interest calculation: $10,000

			Interest charged:

			$10,000 × 1% = $100

			Accumulated outstanding:

			$10,200 + $100 = $10,300

			In this example, interest is always calculated based on the original overdue amount of $10,000.

			Although previous LPI charges remain unpaid, they are not included in subsequent interest calculations. This is known as non-compounded interest or simple interest.

			=== Example 2: Compounded Interest ===
			Assumptions:

			* Outstanding invoice amount: $10,000
			* Interest rate: 12% per annum
			* Interest calculated monthly
			* Monthly interest rate: 1%
			* Customer setting: LPI on LPI = Yes

			Month 1

			Outstanding amount subject to interest: $10,000

			Interest charged:

			$10,000 × 1% = $100

			Total outstanding:

			$10,000 + $100 = $10,100

			Month 2

			Outstanding amount subject to interest: $10,100

			Interest charged:

			$10,100 × 1% = $101

			Total outstanding:

			$10,100 + $101 = $10,201

			Month 3

			Outstanding amount subject to interest: $10,201

			Interest charged:

			$10,201 × 1% = $102.01

			Total outstanding:

			$10,201 + $102.01 = $10,303.01

			In this example, previously charged LPI becomes part of the amount used for future interest calculations. This is known as compounded interest or interest on interest.

			=== Important Note ===
			In many jurisdictions, Late Payment Interest is generally calculated on a non-compounded basis unless otherwise permitted by law or expressly agreed between the parties.

			For this reason, Highnix defaults the customer setting "LPI on LPI" to "No". Users should only enable "LPI on LPI = Yes" when compounded interest is legally permissible and has been contractually agreed by the relevant parties.
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Khkoh at 13:14, 21 June 2026

2026-06-21T13:14:23Z

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2026-06-21T12:49:12Z

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Late Payment Interest - Revision history

Khkoh: /* Mixing LPI with Normal Invoice Items */

Khkoh at 13:14, 21 June 2026

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