What is 'interest on arrears' in SAP FI - Financial Accounting?

interest on arrears - Overview

• Component: FI

• Component Name: Financial Accounting

• Description: The interest paid to creditors when the due date for net payment of a debt has been exceeded.

interest on arrears - Details

• 
  Key Concepts: 
  Interest on arrears is a term used in SAP Financial Accounting (FI) to refer to the interest that is charged on overdue payments. This interest is calculated based on the amount of time that the payment is overdue and the interest rate set by the company. The interest rate can be set for each customer or vendor, or it can be set as a global rate for all customers and vendors. 
  
  How to use it: 
  In SAP FI, interest on arrears can be set up in the customer or vendor master data. The interest rate can be set for each customer or vendor, or it can be set as a global rate for all customers and vendors. When a payment is overdue, the interest will be calculated automatically and added to the invoice amount. 
  
  Tips & Tricks: 
  It is important to ensure that the interest rate is set correctly in order to ensure that customers and vendors are charged the correct amount of interest. It is also important to ensure that payments are made on time in order to avoid having to pay interest on arrears. 
  
  Related Information: 
  For more information about setting up and using interest on arrears in SAP FI, please refer to the SAP Help documentation.