Fee Accrual Job to be an EOD Process

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Fee Accrual Job to be an EOD Process

What does it mean to have a Fee Accrual Job as an EOD process?

The fee accrual is calculated by running the Fee Accrual Job. This job either runs daily ormonth-end,depending on the value of the Accrual Frequency field. On running this job, the following actions take place on a contract:

  • The fee accrued on that date is calculated.
  • The Accrual Terms, Next Accrual Date, and Remaining Amount For Accrual fields are updated.

  • An accrual entry of the typeFees is created on the Transactions tab for the difference amount of the fee accrued on that day and the sum of all the previous accrual amounts.

With the Platinum patch (3.6019.32) release, Q2 Loan Servicing provides you with an option to choose this Fee Accrual Job to be a part of the End Of the Day (EOD) process. This means that the fee accrual transaction gets recorded at the end of the day on the same day of the fee accrual instead of the default process where it gets recorded on the next date SOD.

Why is it required?

Before the Platinum patch (3.6019.32) release, if there was a disbursement that took place on May 5, for an amount of $100,000.00 with an arrangement fee (prepaid fee) of $1,000.00 collected from the customer, the accrual for the first day occurred on May 6 at SOD (Start of the Day). However, if you want the accrual to start on the same day EOD, then you can enable this feature so that the first time the fee accrual transaction gets recorded is on the start day of the fee accrual, instead of the default process where it gets recorded on the next date SOD.

How do we enable this?

Prerequisite

Before enabling the fee accrual to be part of the EOD process, ensure that the following prerequisite is met:

Note:

EOD is specified in the Custom Settings > Org Parameters > Daily Interest Accrual Time. For more information, seeDefining Org Parameterssection inQ2 Loan Servicing Administration Guide.

Steps

To enable fee accrual to be an EOD process:

  1. While creating a loan contract, in the Additional Parameters > End Of Day Parameters section, enable the Enable End of Day Fee Accrual flag.

    Enable End of Day Fee Accrual flag

How is the fee accrual amount calculated for the prepaid and non-prepaid fees in an EOD fee accrual process?

In an EOD process, the system calculates fee accrual for both the prepaid and non-prepaid fees or charges as explained in the following table:

Note:
  • For Straight Line, the accrual amount = (Total fee amount - amount already accrued)/remaining accrual terms.
    • The maturity date is not included as part of the EOD calculation. This means that when Accrual Frequency is:
      • Daily, Accrual Terms = days between fee accrual start date and fee accrual end date. (Not including the maturity date in the remaining accrual terms by not adding one day like it is calculated in the SOD process.)
      • Monthly, Accrual Terms = months between fee accrual start date and fee accrual end date + 1. (Here, the system includes the maturity month end too like it is calculated in the SOD process.)
  • For Income Basis, the accrual amount is calculated as follows:Fee Accrued (on a date)= (Total Interest Accrued (Till Today) * Fee Amount)/Estimated Interest.
  • For more information on normal SOD fee accrual for PrePaid Fees, see the Fee Accrual for Prepaid Fees section.
  • For more information on normal SOD fee accrual for PrePaid Fees, see the Fee Accrual for Non-Prepaid Fees section.
Fee TypeFee Accrual MethodAccrual FrequencyCalculation
Pre-Paid FeesStraight LineDaily

Earlier, in the normal SOD fee accrual, if the fee is accrued today, then the Next Accrual Date is tomorrow.

Now, in the EOD fee accrual process, the system calculates fee accrual for today also. This means that if a disbursement is made today at the beginning of the day or in the afternoon, then when the Fee Accrual Job runs in the evening EOD, it creates an accrual entry for today. This means that the Next Accrual Date is set to the Actual Disbursal Date.

Month-End

Earlier, in the normal SOD fee accrual, if today is January 31, then the Next Accrual Date is February 28.

Now, in the EOD fee accrual process, while creating the contract, if the disbursement date is falling on the month-end then the system updates the Next Accrual Date to this month-end instead of next month-end. This means that the system calculates the fee accrual for the current month-end too. For example, if a disbursement is made today on a month-end, then when the Fee Accrual Job runs on the night of EOD, it creates an accrual entry for today's month-end and then updates the Next Accrual Date to the next month-end. 

Enable End of Day Fee AccrualCurrent Disbursal DateNext Accrual Date
FalseJanuary 31, 2021

February 28, 2021

Note:

One day's accrual of January 31 is also calculated on February 28.

TrueJanuary 31, 2021

January 31, 2021

Note:

The system first updates the Next Accrual Date to January 31. Then an accrual entry is created for January 31 first, and then the system updates the Next Accrual Date to February 28. The Next Accrual Date is updated when the accrual entry gets created. This means that on January 31 when the Fee Accrual job runs, the system creates fee accrual entry for January 31, then the same job updates the Next Accrual Date to February 28.

Note:
It does not matter if the contract is created on January 1 or January 10, the Next Accrual Date will still be January 31 for both SOD and EOD processes.
Income BasisDaily or Month-End
This is based on how much interest is calculated till now. This interest is then divided by the total estimated interest to get a ratio, which is then multiplied by the fee amount to get the accrual amount. In the EOD accrual, these interest calculations include today's interest too.
For example, let us say there is a contract with the following terms and conditions:
Loan Amount$1,000
Interest Rate12%
Time Counting MethodActual Days (366)
Contract DateJanuary 01, 2021
Pre-Paid Fee amount$250
Accrual FrequencyDaily
Then the system calculates the Fee Accrued as explained in the following table:
Contract Creation and Disbursement Date Interest Accrued (Including Today's Interest)Total Interest EstimatedFee Accrued
January 1, 2021
$20
Note:
In the earlier SOD process, when Fee Accrual Job is run, the value of this field is zero.
$1360
$3.68
Note:
(20/360) * 250 = 3.68.
January 2, 2021$20$1360
$7.35
Note:
(40/360) * 250 = 7.35.
Non-Prepaid Fees or ChargesStraight LineDaily
Earlier, in the normal SOD fee accrual, if the fee is accrued today, then the Next Accrual Date is tomorrow.
Now, in the EOD fee accrual process, the system calculates fee accrual for today also. This means that if a charge is created today at the beginning of the day or in the afternoon, then when the Fee Accrual Job runs in the night EOD, it creates an accrual entry for today on the charged date.
Month-End
Earlier, in the normal SOD fee accrual, if today is January 31, then the Next Accrual Date is February 28.
Now, in the EOD fee accrual process, while creating a contract, if the charge date is falling on the month-end then the system updates the Next Accrual Date to this month-end instead of next month-end. This means that the system calculates the fee accrual for the current month-end too. For example, if a charge is created today on a month-end, then when the Fee Accrual Job runs on the night of EOD, it creates an accrual entry for today's month-end and then updates the Next Accrual Date to the next month-end. 
Enable End of Day Fee AccrualCharge Creation DateNext Accrual Date
FalseJanuary 31, 2021
February 28, 2021
Note:
One day's accrual of January 31 is also calculated on February 28.
TrueJanuary 31, 2021
January 31, 2021
Note:
The system first updates the Next Accrual Date to January 31. Then an accrual entry is created for January 31 first, and then the system updates the Next Accrual Date to February 28. The Next Accrual Date is updated when the accrual entry gets created. This means that on January 31 when the Fee Accrual job runs, the system creates fee accrual entry for January 31, then the same job updates the Next Accrual Date to February 28.
Note:
It does not matter if the charge is created on January 1 or January 10, the Next Accrual Date will still be January 31 for both SOD and EOD processes.
Income BasisDaily or Monthly
This is based on how much interest is calculated till now. This interest is then divided by the total estimated interest to get a ratio, which is then multiplied by the fee amount to get the accrual amount. In the EOD accrual, these interest calculations include today's interest too.
For example, let us say there is a contract with the following terms and conditions:
Loan Amount$1,000
Interest Rate12%
Time Counting MethodActual Days (366)
Contract DateJanuary 01, 2021
Charge amount$250
Accrual FrequencyDaily
Then the system calculates the Fee Accrued as explained in the following table:
Charge Creation Date Interest Accrued (Including Today's Interest)Total Interest EstimatedFee Accrued
January 1, 2021
$20
Note:
In the earlier SOD process, when Fee Accrual Job is run, the value of this field is zero.
$1360
$3.68
Note:
(20/360) * 250 = 3.68.
January 2, 2021$20$1360
$7.35
Note:
(40/360) * 250 = 7.35.
Note:
For a loan having a maturity date as mid of the month, the last fee accrual date continues to be the same as the maturity date of the loan. This is true for both Income Basis and Straight Line methods.
Example
Pre-Paid Fees
Let's say the current system date is month-end, April 30, 2014.
Let's create two late fees in the fee set:
Fee 1: Late Fee - Month End
Accrual FrequencyMonth-end
Accrual MethodStraight Line
Fee 2: Late Fee - Daily
Accrual FrequencyDaily
Accrual MethodStraight Line
Two Late Fees in Fee Set
Fee 1: Late Fee, Month-end, Straight Line
Fee 2: Late Fee, Daily, Straight Line
Let us add three pre-paid fee setups in the lending product:
Product Pre-Paid FeesProduct Pre-Paid Fee NameFrequencyAccrual Method
1PPD-00000112DailyStraight Line
2PPD-00000113Month-endStraight Line
3PPD-00000114DailyIncome Basis
Product Pre-Paid Fees
Let us create a contract with the preceding pre-paid fees.
Contract Prepaid Fees
Now let us disburse $10,000.
Disbursement
The Prepaid fees are updated as follows:
Prepaid Fees: Daily, Straight Line
Prepaid Fees: Daily, Income Basis
Prepaid Fees: Month-end, Straight Line
Note:
Since it is an EOD accrual process, the Next Accrual Date remains as the current system date for Month-end frequency April 30, 2014, which is the end of the month. This is for EOD Accrual Time only, not for SOD. For SOD, it would be next month-end, not the same month-end.
Non-Prepaid Fee or Charges
To check how the system behaves when there are late charges, let us look at another contract that has a Due Date of April 29, 2014.
On April 29, 2014, when a bill is generated and not paid as follows, the system creates late charges: 
Contract 2: Bill Not Paid
Moving system date to April 30, 2014, to create late charges for the preceding unpaid bill:
Charges Due to Late Fees
Charge 1
Charge 2
Note:
In both the charges, the Next Accrual Date is set to April 30, 2014, as the fee accrual is an EOD process. If Fee Accrual Job was part of the SOD process, then the Next Accrual Date would have been next month-end.
After the Fee Accrual Job runs
Now on April 30, 2014, after the Fee Accrual Job runs at the end of the day, the system creates accrual entries for all fees of both the contracts and the Next Accrual Date updates to the next day for a daily accrual frequency and to the month-end for a Month-end accrual frequency.
Prepaid Fees: Daily, Straight Line
Prepaid Fees: Daily, Income Basis
Fee Accrual on April 30, 2014
As depicted in the preceding images:
  • Estimated Interest = $662.86.
  • Interest accrual on April 30 for one day = $10,000 * (12/100) * (1/365) = $3.28.
  • Fee Accrued for April 30 = For Income Basis, the accrual amount = (Interest Accrued * Fee Amount)/Estimated Interest = (3.28/662.86) * 100 = 0.49.Thus system calculates one day's fee accrued of April 30 as Fee Accrued = $0.5000.
On a day before Maturity Date
Say Maturity Date is March 30, 2014, then on moving the system date to March 29, 2014, the Next Accrual Date of the Pre-Paid fee moves to the max, which is December 31, 3000.
Maturity Date
Prepaid Fee: Daily, Income Basis
Pre-Paid Fee: Daily, Straight Line
One day before maturity, on March 29, 2014, the system creates one last accrual entry and sets the date to the maximum, which is December 31, 3000.
Pre-Paid Fee: Month-end, Straight Line
On March 29, 2014:
On March 30, 2014:

 
          
        

      

 
      
 
      

        
          

        
        
      

 
    

  
    
    

      
      

                
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