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Set up and run account interest

You can use the FA system to calculate, track, and run account interest for debit, credit, and other accounts. You can also use the account interest functionality to accrue negative interest on accounts that use portfolio credit (see Provide credit to your clients).

Once interest is set up, the system calculates accrued interest every day using the following formula:

Equation 1. 
Accrued interest=Account balance⋅(Base interest rate+spread)Number of days in a yearAccruedinterest=\frac{Accountbalance⋅\left(Baseinterestrate+spread\right)}{Numberofdaysinayear}


In this formula, account balance is the balance at the beginning of the day, base interest rate is determined by an index or a fixed or floating rate, and spread is interest on top of the base rate that you can specify depending on the account balance.

The following sections describe the process of setting up and running account interest in the Portfolio window and the Fees and interests view. In the first step, you set up account interest and start accruing interest on an account. In the second and third step, you define an interest run and execute it.

Step 1 - Set up account interest

To start accruing account interest, you need to specify interest details for the account:

  1. Open the "Interest details" section in the Portfolio window, Accounts tab and click Edit.

  2. Fill in the fields (for field descriptions, see Accounts in FA Back reference).

  3. Click Ok and then Save & close.

Interest now accrues on the account. To track the accrual, select the portfolio in the Overview and see the "Accr. int." column.

Step 2 - Define the run

To add the accrued interest on the account, you need to run it as a corporate action that creates an interest transaction. To define the interest run, do the following:

  1. In the Fees and interests view, click New fee/interest calculation.

  2. Select "Account interest" as the action type and fill in the fields in the upper section of the window:

    • Calculation date* - Account interest payment date (same as the previous account interest run date or later). The system runs the interest payment for interest accrued since the previous interest payment date (if available), the portfolio start-up date, or the date of the earliest transaction in the portfolio.

    • Transaction type* - The transaction type for the account interest transactions created when the run is executed. Select "Interest (INT)".

    • Memo - Notes related to your account interest run. You can use them, for example, to store additional information or to help with searching for previous interest runs.

  3. Click Save & close.

The interest run is now saved but not yet executed.

account-interest-define.png

Step 3 - Execute or schedule the run

To execute the account interest run defined in the previous step, do the following:

  1. Double-click the account interest run you saved to open the Corporate action run window.

  2. In the middle section of the window, select the portfolios to run the interest to and fill in the tax rate and type of the interest transactions (You can set up default tax rates that the system selects automatically in Preferences - Taxation - Default tax rates).

  3. To execute the run, click Run & close, preview the transactions, and click Accept and run. You can also schedule the run for later by entering a date and time and clicking Schedule & close.

The interest transactions are created with the status "Accepted". You can view the transactions in the Overview or Transactions view.

account-interest-run-calc.png

Re-run account interest for a specific date

You can re-run account interest for a specific date by selecting that date as the Calculation date when defining the interest run in step 2. When you execute the run in step 3, the system re-runs account interest for this date and creates a new interest transaction that replaces the existing one.

In this section: