To add to your grief, when customer makes a payment on account, the interest being calculated on overdue amounts drops as well, therefore on each payment, you need to first post the amount of interest accrued (which means previewing the statement for that customer) then post the payment applying it to interest then the original invoice.  Very cumbersome and time consuming.  Wouldn't it be nice if there was a place on receipt to enter the interest amount that would automatically post it to interest revenue, then apply the rest to the invoice.  I know some other programs will do that.  As bad as it was previously, why not have an option to choose the old bad way versus the worse new way

If I remember correctly the calculation of interest rate has been changed to be daily compounded for the 2015 version.

Sage 50 is now using the daily rate, which is fine; however, it is not actually calculating the interest using that daily rate. As mentioned above, the statement is showing the appropriate daily rate; however, the actual interest calculated is wrong by a factor of approximately 8.7.

The daily compounding rate will be lower than the daily straight rate. 12% / 365 is 0.0328%, but if the total compounded annual rate is supposed to be 12%, the daily rate must be lower or it will exceed the 12%. If I set my annual rate to 12%, I show a daily rate of 0.0311% on both the setup screen and the statement.

As for the incorrect calculation on the statement - how overdue is the $10190.67? Just one month? If so, then yes the interest would be 10190.67*12/365*30 days = 100.51, but if the amount is overdue by several months you need to increase the number of days in the formula accordingly. If the amount is overdue by 8-1/2 months, the $869 is reasonable.

However, that all said, I did my own calculation using the sample database on Mainline Rail Ltd. As of Mar 31/15 it has an invoice from Oct 10/14 still owing $12,988.38, with 60 day payment terms. I ran a statement using 12% annual and the statement calculated $334.93 interest. No matter how I do the math, I consistently come up with interest higher than that. If I use the full 111 days, I calculate interest at 448 using the daily rate, or $456 actually compounding the interest at 12% annually. If I use 90 days, I get $363 daily or $368 compounding. Where does the $334 come from? Maybe my compounding math is wrong, but I can't see how I could be out by that much.

I am very new to bookkeeping/Sage and we upgraded to the 2015 version so I would be very interested to know how everyone is going to use this new feature!  I have a few customers who have over-due accounts and we add 2% interest per month - so I have having a difficult time with this.... Thank you!

I have received the answer from 2nd-level tech support.

Bottom-Line : According to a believable source in tech support : The interest calculation feature does not work (ie. gives the wrong results) at this time in version 2015.  

The only solution they are offering (until the programmers figure out the problem) :

a) TURN OFF the interest calculation feature

b) Calculate the interest manually and insert the amount into an additional invoice

BTW, you can't go back to the old interest calculation method once your data has been converted to version 2015.

NB : I am a Sage business partner

yes, there is a problem, 12% annual compounded daily in sage is .0311%

but .0311 * 365 is only 11.35%

what is the best way to track monthly interest charges to correctly apply payments ?

  run the statement this month (sales invoice is say 31 days overdue)

  create an invoice for the interest, crediting the interest income account for one day of interest

  run the statement next month

     the problem is the statement will show 61 days of interest on the original invoice

     and an interest invoice will appear on the statement, billing the first day of interest

     so the statement will show 62 days of interest due

and I don't see how to calculate interest charges for one customer, and not another - I presume Sage assumes that charging interest on an overdue account balance applies to all customers - as corporate policy

12% annual interest compound daily is

=((1+0.12/365)^1)-1 = .0329% (not .0311%)