# How is the Simple Interest Calculation done in ADDA?

Simple Interest: This is the most recommended and widely used method where Late Payment Fees will have to levied for delayed payments. How Simple Interest is calculated?
Lets assume a Quarterly Invoice is generated for amount Rs. 1000 with Invoice date: 1st April and Due date: 15th April.
Simple Interest: 18% per Annum.
Formula for LPI= Principal Amount * Interest * ( No. of days delayed/365).

Case-1: Full Payment before due date.
No Late payment will be levied.
Case-2: Full payment after due date. i.e, payment made on 25th April.

Here LPI will be charged on full amount for 10 days (from 16th to 25th April)
i.,e LPI= 1000 * 18% * (10/365)= Rs. 5

Case-3: Partial payment before due date. i.e, Rs. 600 paid before 15th April and remaining payment (Rs.400) is NOT made until next invoice generation on 1st July.

Here LPI will be charged for Rs. 400 for 76 days (from 16th April to 30th June)
i.e.,LPI=400* 18% * (76/365)= Rs. 15

Case-4: Partial payment after due date. i.e., Rs 600 is paid on 25th April

and remaining payment is NOT made until next invoice generation on 1st July.

Here LPI will be charged on full amount (Rs.1000) for 10 days (from 16th to 25th April) and for remaining amount (Rs.400) LPI will be charged for 66 days (from 26th April to 30th June)
i.e., LPI= [1000* 18% * (10/365)] + [400 *18% * (66/365)]= Rs. 18.

Case-5: No payment made till 1st July.

Here LPI will be charged on full amount for 76 days (from 16th April to 30th June)
i.e., LPI= 1000 * 18% * (76/365)= Rs.37

In all the above cases LPI will be posted in next system generated invoice posted on 1st July as separate line item.

Note: In Cases 3, 4 and 5- for April Invoice the Interest will start calculating from day 1 (1st July) if no respective Payments are done beyond this date. This is because there is no grace period for April Invoice in July to Sept quarter.

Ex: lets assume that respective payments are made on 10th July. LPI will be charged for 10days (1st to 10th July) as below.
For Case-3:LPI= 400 * 18% * (10/365)= Rs.2
For Case-4:LPI= 400 * 18% * (10/365)= Rs.2
For Case-5:LPI= 1000 * 18% * (10/365)= Rs.5
And this will be posted in next system generated invoice on 1st Oct.

The same logic can be applied to Monthly, Half yearly or Yearly Invoicing systems.

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