Interest Posting Job to be an EOD Process

What does it mean to have an Interest Posting Job as an EOD process?

With the Platinum patch (3.6019.32) release, the Interest Posting Job is now a part of the EOD Job. This means that the interest is posted after calculating the interest on the closing balance of the outstanding principal at the end of the day in the EOD process.

Why is an Interest Posting Job required to be a part of EOD?

To enable the accounting and reporting of interest capitalization on the night of interest capitalization rather than waiting till the next day start of day process, the Interest Posting Job, which is responsible for executing capitalization of interest, is run a day before the actual IPT date, in the night or end of the day, so that the interest is posted on the same date and you do not have to wait for the next day for Interest Posting Transaction (IPT) creation and accounting.

For an EOD interest accrual type of loan, the Interest Posting Job is now part of the EOD process, and there are two ways in which the interest must be accrued for interest posting:

• If today is the interest posting date, then the interest posted today includes interest accrued until the previous day only.

• If today is the interest posting date, then the interest that is posted today includes the sum of the interest accrued till the previous day and the interest accrued for today (the posting date’s interest.)

To support these two scenarios, a new parameter called Accrual Type is introduced in the system at the product level as well as contract level that consists of the following two options:

• Accrual To Date

• Accrual Through Date

What are the types of accrual used for interest posting and how to use those?

There are two types of accrual calculating methods for Daily Interest Accrual Time EOD:

• Accrual To Date

• Accrual Through Date

Accrual To Date

When you select Accrual To Date, the interest amount posted on an interest posted date would be equal to the amount accrued until the previous date. This is the default behavior of SOD loans. If you select Accrual To Date on the contract, it would mean that the interest amount that would get posted on an interest posting date would be equal to the amount accrued till the previous date. 

Example

In the following example, the interest amount that will be due on June 5 includes the interest accrued till June 4:

Interest Posting: Accrual To Date

Following are the dates related to interest posting for Accrual To Date Accrual Type:

Accrual Through Date

When you select Accrual Through Date, the interest of the interest posting date is included in the IPT. If you select Accrual Through Date on the contract, it would mean that that the interest amount that would get posted on an interest posting date would be equal to the amount accrued till that date.

Example

In the following example, the interest amount that will get posted and capitalized on June 5 includes the interest accrued till June 5 EOD:

Interest Posting: Accrual Through Date

Following are the dates related to interest posting for Accrual Through Date Accrual Type:

How do we set the Accrual Type for an EOD loan?

Prerequisite

Before you try to set the Accrual Type, ensure that the following prerequisite is met:

• Specify EOD in the Custom Settings > Org Parameters > Daily Interest Accrual Time.

  Note:

  • If nothing is specified in the Daily Interest Accrual Time, then the default value is SOD, which is the normal scenario of interest accrual at the beginning of the day in the SOD process.

  • For more information on Org Parameters of the Custom Settings, see Defining Org Parameters section in the Q2 Loan Servicing Administration Guide.

Steps

To set the Accrual Type:

1. After creating a lending product, click Edit Additional Parameters.

2. In the End Of Day Parameters section, select the Accrual Type as Accrual To Date or Accrual Through Date based on the requirement.

OR

1. While creating a loan contract, in the Additional Parameters > End Of Day Parameters section, select the Accrual Type as Accrual To Date or Accrual Through Date based on the requirement.

OR

1. After creating a contract, and before disbursing, click Edit Additional Parameters.

2. In the End Of Day Parameters section, select the Accrual Type as Accrual To Date or Accrual Through Date based on the requirement.

Accrual Type

In the Lending Product

In the Contract

How does Interest Posting Job as part of EOD impact Additional Interest Components (AIC)?

IPT creation is the same as regular interest posting because the same IPT job takes care of AIC too.

The Accrual Type is also used to identify the interest posting amount on the additional interest component:

• For Accrual To Date: Additional Interest IPT is created a day before the actual IPT date on the interest component.

• For Accrual Through Date: Additional Interest IPT is created on the actual IPT date on interest component along with the interest of that day.

Example: Accrual Type

Let us understand how the system behaves when Interest Posting Job is part of the EOD process with the help of an example using the following steps:

1. Let us say that the Current System Date is January 23, 2016.

2. Let us create two contracts with the following terms and conditions:

   Contract 1: Accrual To Date		Contract 2: Accrual Through Date
   Loan Amount	$10,000	Loan Amount	$10,000
   Interest Rate	12%	Interest Rate	12%
   Time Counting Method	Month and Days	Time Counting Method	Month and Days
   Is Interest Posting	True	Is Interest Posting	True
   Interest Posting Frequency	Monthly	Interest Posting Frequency	Monthly
   Is Capitalization Enabled	True	Is Capitalization Enabled	True
   Payment Frequency	Monthly	Payment Frequency	Monthly
   Payment Term	12	Payment Term	12
   Accrual Type	Accrual To Date	Accrual Type	Accrual Through Date
   Disbursement
   Transaction Amount	$10,000	Transaction Amount	$10,000
   Next Due Date	February 23, 2016	Next Due Date	February 23, 2016
   Next Interest Posting Date	February 23, 2016	Next Interest Posting Date	February 23, 2016

3. Move to the IPT Creation Date for Contract 1, February 22, 2016,

   As soon as the system runs the InterestPostingJob at the end of the day of February 22, 2016, in the evening, an Interest Posting Transaction is created in the system as follows:

   Interest Posting Transaction: Contract 1 with Accrual To Date

   

   

   Note:

   Interest Posting Transaction is not yet created for Contract 2 with Accrual Through Date Accrual Type.

   From the preceding images, we observe the following interest posting details:

   Field	Values
   Interest Posted	$100 Note: Interest Posted = $10,000 * (12/100) * (30/360) = 100.
   Transaction Due Date	February 23, 2016
   Transaction Posting Date	February 22, 2016
   Transaction Creation Date	February 22, 2016
   Capitalization Date	February 22, 2016

   The contract is updated with the following details:

   Contract 1: Accrual To Date

   

   

   

4. Move to the IPT Creation Date for Contract 2, February 23, 2016.

   As soon as the system runs the InterestPostingJob at the end of the day of February 23, 2016, in the evening, an Interest Posting Transaction is created in the system as follows:

   Interest Posting Transaction: Contract 2 with Accrual Through Date

   

   

   

   From the preceding images, we observe the following interest posting details of Contract 2 with Accrual Through Date:

   Field	Values
   Interest Posted	$103.33 Note: Interest Posted = $10,000 * (12/100) * (31/360) = 103.33.
   Transaction Due Date	February 23, 2016
   Transaction Posting Date	February 23, 2016
   Transaction Creation Date	February 23, 2016
   Capitalization Date	February 23, 2016

   The contract is updated with the following details:

   Contract 2: Accrual Through Date

   

   

   

   

5. Check the details and Bill of Contract 1 with Accrual To Date.

   Contract 1 with Accrual To Date: On Due Date February 23, 2016

   

   Contract 1 with Accrual To Date: Bill on Due Date February 23, 2016

   

6. Check the Bill of Contract 2 with Accrual Through Date.

   Contract 2 with Accrual Through Date: Bill

   

From the preceding images, we observe the following difference between the two loan contracts:

Example: Additional Interest Components

Let us understand how does the EOD accrual system impact the additional interest components with the help of the following self-explanatory tables:

Accrual Type = Accrual To Date, Disbursement = $5000, Available Amount For Funding = $5000

Accrual Type = Accrual Through Date, Disbursement= 5000, Available amount for funding = 5000