Interest Calculation Issues
Concept
Most interest calculations in Argos are calculated as ledger
balance x interest rate / 365 x number of days since interest was last posted.
If an accounts interest amount is vastly different from the
expected calculation, the following steps should be undertaken to identify what
has caused the change to the interest transaction or accrual.
Back Dated Account Transactions
If a transaction is posted to an account that is dated prior
to the last transaction date, then the system will automatically re-calculate
the interest to take into account the change of balance by that amount.
Depending on the value of the posted transaction, the
account balance and the period of time that has elapsed since the backdated
transaction, this can cause a significant credit or debit to the accrual.
To identify these transactions, edit the account and
select 
.
Order the transactions list by descending input date by
clicking on the column heading Input Date twice, the first time will order it
by input date ascending.
You can then determine whether this is the cause of the
recalculation.
Interest Profile Rate Changes
Check the interest profile has not been updated or had a
new line added which would affect the interest calculation
Check all interest rate change transactions are ‘posted’
Check whether an interest rate change was backdated on the
profile (ie. dated prior to the last rate change that was applied), as this will
delete any later rate changes and apply the rate as at the new date.
For Example: A 10.5% Loan rate had been established
On the 31/03/17, the mortgage rate was changed to 10.25%
On the 30/04/17, it was realised that the rate should have
been applied as at the 01/03/17.
Adding another line dated the 01/03/17, will then delete the
31/03/17:
(A warning message as below is displayed when this will
occur):
The interest profile now appears as below:
This would result in a re-calculation of the interest
accrual for all accounts with this rate, as it is now being applied 30 days
earlier.
Debit and Credit Amounts
Ensure that the highest debit amount entered on all interest
profile transaction lines exceeds the balance of the account.
i.e. that the debit amount is set to $99,999,999 (99 million
dollars). If the debit amount was only set to 99,999 and a loan had a balance
in excess of $100,000, interest would only calculate on the $99,999.00.
Investment Accounts
If the account is a borrowing account ensure the credit
amount(s) entered contain a leading minus.
Override Rate Changes
Override rates are not date specific.
If a change is made to the override rate, then on 
, interest will be re-calculated
for the life of the account based on the new override rate.
To make a change to the override rate (such as implementing
a zero rate of interest on a salvage account), a specific process must be
followed, which applies date sensitive interest profiles at the required rate(s).
Related Articles
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