Setting Up Interest Calculations for Late Payments in Tally Prime

Tally Prime allows businesses to calculate interest automatically for late payments. This feature helps in enforcing payment discipline and tracking additional revenue from interest charges. In this guide, we’ll set up interest calculations with a practical example.

Step 1: Enable Interest Calculations

1. Open Tally Prime.
2. Go to Gateway of Tally.
3. Navigate to F11: Features.
4. Under Accounting Features, set Activate Interest Calculation to Yes.
5. Press Ctrl+A to save the settings.

Step 2: Configure Interest Parameters for Ledgers

Now, configure interest calculation parameters for specific ledgers:

1. Go to Gateway of Tally.
2. Select Alter under Ledgers.
3. Choose the ledger for which you want to enable interest calculation, e.g., Debtors.
4. Set Activate Interest Calculation to Yes.
5. Enter the following details:
   • Interest Style: Choose Simple or Compound.
   • Rate: Enter the interest rate, e.g., 12% per annum.
   • Calculation Period: Specify From Due Date or From Date of Transaction.
6. Press Ctrl+A to save.

Step 3: Record a Transaction

Let’s record an invoice to understand how interest is calculated:

1. Go to Accounting Vouchers.
2. Select Sales Voucher.
3. Enter the following details:
   • Customer Ledger: ABC Traders.
   • Amount: ₹50,000.
   • Due Date: 30 days from the date of invoice.
4. Press Ctrl+A to save the voucher.

Step 4: Calculate Interest for Overdue Payments

Once the due date has passed, Tally Prime will automatically calculate interest for overdue payments:

1. Go to Gateway of Tally.
2. Select Display More Reports.
3. Navigate to Statement of Accounts and select Interest Calculations.
4. Choose the ledger, e.g., ABC Traders.
5. View the calculated interest for overdue payments, based on the configured rate and period.

Step 5: Generate an Interest Statement

To communicate interest details to customers:

1. While viewing the interest calculation report, press Alt+P to print the statement.
2. Alternatively, export the report by pressing Ctrl+E.
3. Share the statement with the customer to inform them of the overdue amount and interest charges.

Example

Suppose a company sells goods worth ₹50,000 to ABC Traders, with a due date of 30 days. If the payment is delayed by 10 days and the interest rate is 12% per annum, the interest calculation will be as follows:

• Principal Amount: ₹50,000
• Interest Rate: 12% per annum
• Delay Period: 10 days
• Interest: (₹50,000 × 12% × 10) ÷ 365 = ₹164.38

The interest amount of ₹164.38 will be added to the overdue payment.

Conclusion

By setting up interest calculations in Tally Prime, businesses can automate the process of calculating and tracking interest on late payments. This helps improve cash flow and encourages timely payments from customers.