Interest on Arrears Explained

Interest on arrears is a complex subject with a wide variety of different views on how it should be calculated. The WeconnectU mechanism is however flexible enough to ensure we cater for a wide variety of situations.

The Interest on Arrears feature needs to be enabled by WeconnectU Support, so please forward your request to support.rams@weconnectu.co.za should you wish to utilise this functionality.

The following principles are supported:

Interest can only be charged if specified in the Lease Agreement - in order to support this, interest on arrears can be enabled/disabled on a per Lease basis and the annual percentage applicable can also be changed on a per lease basis on the current lease terms.
Interest on Arrears are charged from the Arrears Management Dashboard - It is Portfolio specific, in other words when you select the option, arrears will be charged on all Tenant Account where the Lease has been enabled for Arrears Interest Billing and where the Asset is in a Portfolio that you have access to.
In terms of legislation, Interest is due to the Landlord, not the Agency. This means that all Agency categories are by default excluded since the agency cannot charge interest on admin fees, deposits etc.
Interest would therefor only accrue on amounts due to the Landlord, which means calculation is based on Rent and Recovery transactions on the Landlord Income Due account. The Interest on Arrears category will always be excluded to avoid the compounding of interest.
Clients have different requirements in terms of the time frame for which they want to charge interest. We therefor provide for a flexible date selection process so that you can decide the period for which you want to charge interest. This means that they will have the option for example:
- to charge interest from the previous time interest was charged;
- to charge interest FROM any date TO any date - for example only from 1st to the 7th of the month;
- to charge interest only on a SPECIFIC day - for example only on the 10th of the month. This will only charge one day's interest on the outstanding balance for this day;
Once funds have been received in the Tenant wallet and the Tenant account balance is ZERO or in CREDIT, the Tenant should not be charged interest. The option to exclude Tenants with a zero or credit balance from the interest charging process is available, and can be configured by WeconnectU Support.3

NOTES

There are no restrictions on the From Date, but it should be noted that where Interest on arrears was charged previously on an account after the selected From Date, interest will then only be charged on that account from the date of the previous interest transaction. For example if the last interest charge on Account A was on 7 May and the next Bulk Interest is initiated with a date selection from 1 May to 15 May, then interest on Account A will only be charged from 7 May to 15 May.

There are no restrictions on the From Date, but it should be noted that where Interest on arrears was charged previously on an account after the selected From Date, interest will then only be charged on that account from the date of the previous interest transaction. For example if the last interest charge on Account A was on 7 May and the next Bulk Interest is initiated with a date selection from 1 May to 15 May, then interest on Account A will only be charged from 7 May to 15 May.
The latest TO DATE will be the day before the Current date
This will allow users to decide the scope of their Interest charges for example:
- Charge Interest on 8th of every month for all outstanding balances from 1st to 7th
- Charge Interest on 8th of every month for all outstanding balances from the previous date when Interest on Arrears was charged previously.
- Charge Interest on arrears only on the 8th of the month, for the balance on the 7th
Eligible Transactions will be all Rent and Recovery Transactions on the Landlord Income Due account, excluding Interest on Arrears transactions where:
Interest capitalised for period = SUM (Interest Allocation for every day in the period)
If the Bill Interest on Settled Accounts is disabled for the Team, the Tenant Account Balance on the Date that Interest is charged must be > R 0. If the Tenant Account is zero or in credit, no interest will be charged.

How to Setup Interest on Arrears

How to bill Interest on Arrears

Interest on Arrears Calculation Report