Hi Nazeer, Thank you for creating the JIRA ticket and initiating the discussion.
"The problem is the upfront interest amount can't be posted directory to GL Account as I am not sure marking future installments interest paid is a good idea (at least with periodic accruals)." With respect to the above comment, it all depends on how we are handling the upfront interest that is being collected For example: Disbursement amount 10,000$ upfront Interest 1,000$ So if we actually disburse only 9,000 $ and collect back 10,000 $ 1. I assume 1,000$ would be marked collected as of the disbursement date? - that 1000$ collection would get allocated to principal or interest? 2. On what amount of repayment schedule will be generated? (9000 or 10,000$) 3. What will be the Principal and Interest split? I think we will have to first discuss and agree upon the loan cycle, schedule behavior and other scenarios use cases and based on that we can get clarity on accounting entries. I am happy to discuss further on this and help on documenting the feature and available next week at any time for the same. let me know if we can have one discussion next week. Regards, Bharath Lead Implementation Analyst | Mifos Initiative Skype: live:cbharath4| Mobile: +91.7019635592 http://mifos.org <http://facebook.com/mifos> <http://www.twitter.com/mifos> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik < nazeerhussain.sh...@gmail.com> wrote: > Hi Bharath, > > Thank you. I will create a Jira ticket so that community members can > update the requirements there. > > 1. Cash-based > For this, we can directly post the entry to income from interest GL Account > Nazeer -> The problem is the upfront interest amount can't be > posted directory to GL Account as I am not sure marking future installments > interest paid is a good idea (at least with periodic accruals). So I am > thinking of keeping the upfront interest on Liability GL account and keep > on adding interest paid transaction(s) before installment due. I assume > this works for 3 accounting scenarios. I haven't thought about interest > recalculation config so far. > > 2. Accrual (Upfront) > For this type > We need to have a receivable account credited first and then would be > moved to the Income GL account when the payment comes in > Nazeer -> Same as above > > 3. Accrual (periodic) > Since on the business side, the Income amount is being collected upfront I > do not think it is correct to have interest accruals at the installment or > at a periodic cut-off. > but the system should accrue if any fees or penalties are introduced in > the middle of the loan term. > Nazeer -> Same as above > > On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bgo...@mifos.org> wrote: > >> Hi Nazeer, >> >> Good to hear from you and happy to see this feature being worked on. >> Has a Fineract JIRA been created yet for the same? it will be helpful if >> you could share the JIRA ticket with the flushed-out functional and >> implementation details. >> Curious to know more about what type of product configurations this would >> be allowed and not allowed. as it would become more complex with daily >> interest calculations and recalculations enabled. >> >> Here are my 2 cents on the accounting entry for the same >> >> 1. Cash-based >> For this, we can directly post the entry to income from interest GL >> Account >> >> 2. Accrual (Upfront) >> For this type >> We need to have a receivable account credited first and then would be >> moved to the Income GL account when the payment comes in >> >> 3. Accrual (periodic) >> Since on the business side, the Income amount is being collected upfront >> I do not think it is correct to have interest accruals at the installment >> or at a periodic cut-off. >> but the system should accrue if any fees or penalties are introduced in >> the middle of the loan term. >> >> Anyone with experience in upfront interest loan products with >> accrual-based accounting, feel free to correct me and share your thoughts >> on the same. >> >> >> >> Regards, >> Bharath >> Lead Implementation Analyst | Mifos Initiative >> Skype: live:cbharath4| Mobile: +91.7019635592 >> http://mifos.org <http://facebook.com/mifos> >> <http://www.twitter.com/mifos> >> >> >> >> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik < >> nazeerhussain.sh...@gmail.com> wrote: >> >>> Hi all, >>> >>> Hope this email finds you well. We are planning to implement upfront >>> interest collection for the loans for some of our business use cases. With >>> respect to the following 3 accounting configurations, how to post the >>> journal entries ? >>> >>> >>> >>> 1. Cash Based >>> 2. Accrual (Up front) >>> 3. Accrual (Periodic) >>> >>> >>> Can we directly post the entry to income from interest GL Account? Or do >>> we need to have some kind of liability GL account where upfront collected >>> interest will be posted on this account initially and then moved to income >>> from the interest account? >>> >>> And how the Periodic accrual entries should be posted (As periodic >>> accrual entries will be accrued and posted per instalment)? >>> >>> >>> Thanks, >>> >>> Nazeer >>> >>> SSA, CrediLinq >>> >>> https://www.credilinq.ai >>> >>> >>>
