Re: Loans - Upfront Interest Collection

[Bharath Gowda <bg...@mifos.org>]

Hi Nazeer,

Good to hear from you and happy to see this feature being worked on.
 Has a Fineract JIRA been created yet for the same? it will be helpful if
you could share the JIRA ticket with the flushed-out functional and
implementation details.
Curious to know more about what type of product configurations this would
be allowed and not allowed. as it would become more complex with daily
interest calculations and recalculations enabled.

Here are my 2 cents on the accounting entry for the same

1. Cash-based
For this, we can directly post the entry to income from interest GL Account

2. Accrual (Upfront)
For this type
We need to have a receivable account credited first and then would be moved
to the Income GL account when the payment comes in

3. Accrual (periodic)
Since on the business side, the Income amount is being collected upfront I
do not think it is correct to have interest accruals at the installment or
at a periodic cut-off.
but the system should accrue if any fees or penalties are introduced in the
middle of the loan term.

Anyone with experience in upfront interest loan products with accrual-based
accounting, feel free to correct me and share your thoughts on the same.



Regards,
Bharath
Lead Implementation Analyst | Mifos Initiative
Skype: live:cbharath4| Mobile: +91.7019635592
http://mifos.org  <http://facebook.com/mifos>
<http://www.twitter.com/mifos>



On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
nazeerhussain.shaik@gmail.com> wrote:

> Hi all,
>
> Hope this email finds you well. We are planning to implement upfront
> interest collection for the loans for some of our business use cases. With
> respect to the following 3 accounting configurations, how to post the
> journal entries ?
>
>
>
>    1. Cash Based
>    2. Accrual (Up front)
>    3. Accrual (Periodic)
>
>
> Can we directly post the entry to income from interest GL Account? Or do
> we need to have some kind of liability GL account where upfront collected
> interest will be posted on this account initially and then moved to income
> from the interest account?
>
> And how the Periodic accrual entries should be posted (As periodic accrual
> entries will be accrued and posted per instalment)?
>
>
> Thanks,
>
> Nazeer
>
> SSA, CrediLinq
>
> https://www.credilinq.ai
>
>
>

Re: Loans - Upfront Interest Collection

[Nazeer Hussain Shaik <na...@gmail.com>]

Hi James,

Noted. I will get back to you on contributing this change to Fineract as I
had implemented for the company presently I am working.
I will open discussion on Jira ticket so that everybody can understand and
provide their review comment with respect to requirements & Design.


Thanks,
Nazeer
SSA, Credilinq

On Fri, Jun 9, 2023 at 9:19 PM James Dailey <ja...@gmail.com> wrote:

> Hi Nazeer - I’m trying to wrap my head around how you are defining income
> and what limitations you are finding.  Glad to see the discussion.
>
> Are you planning on making this a contribution to the Fineract code?  If
> so, I’d like a lot more details, and some design thinking that’s reflected
> in the tickets.
>
> Generally, and this goes to comments already made, my feeling is:
>
> The first strategy should be to use configurations  of products and
> accounting. If that really fails, then a design analysis should be done to
> understand why?  Is the product concept new?  Is there a compelling reason
> to include it in a global banking application?  Is it legal and normal in
> most jurisdictions?  In other words, does it help the project become
> better?
>
> Then, there are two options at least:
> A) create a new configuration concept and propose the code change.  Note,
> this should be designed to fit a class of issues not just one product in
> one institution.  As a rule, it should not break existing features.
> Regression Tests may need to be added to ensure that’s the case.
>
> B) make use of a plug in or Java class replacement concept- I believe that
> mechanism is under utilized so might need more explanation or development.
> I’m not sure that would work but worth exploring if it saves time.
>
> Thanks
> James
>
>
> On Thu, Jun 8, 2023 at 10:48 PM Nazeer Hussain Shaik <
> nazeerhussain.shaik@gmail.com> wrote:
>
>> That depends on your loan disclaimer. If you are saying I am collecting
>> 18% interest (for example) you can't collect the charge instead of
>> interest. Your income from interest will always be zero which will become
>> an issue.
>> With respect to accounting (To Bharath) I will get back in the evening
>> (Day time IST busy).
>>
>> Thanks,
>> Nazeer
>>
>> On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io> wrote:
>>
>>> Hello Nazeer,
>>>
>>> I concur with Bharath, the existing features should meet your
>>> requirements. Since the interest portion is collected at disbursement, you
>>> could have the interest collected as a disbursement fee with the interest
>>> rate set at 0%.
>>>
>>> Using your example:
>>>
>>>    - Principal is 10k
>>>    - Interest(disbursement fee) is 10% = 1k
>>>    - At disbursement, 10k gets disbursed and 1k collected as
>>>    interest(fee) immediately
>>>    - Customer gets 9k but pays the full 10k over the loan term
>>>
>>> Using the above method, cash accounting should work just fine since the
>>> interest(fee) has already been paid.
>>>
>>> These are my thoughts, please correct me if I misunderstood your
>>> requirement. Share your documentation to help with testing. I can help with
>>> that(testing).
>>>
>>> Thanks,
>>> Ruhiu
>>>
>>> On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:
>>>
>>>> Hi Nazeer,
>>>>
>>>> Thanks for clarifications on the implementation, could you please help
>>>> us with implementation notes on configuration and validations on the
>>>> implemented changes?
>>>> It will be useful for the interested members to test and it also helps
>>>> in documenting the same.
>>>>
>>>> Coming back to the accounting entry discussion
>>>>
>>>> Since we are collecting the full interest upfront and only principal
>>>> over the rest of the installments,
>>>> For cash based Accounting
>>>> - It does not feel correct to have a liability account approach as cash
>>>> based Accounting principal is to effect the income account directly.
>>>>
>>>> For periodic accrual Accounting
>>>> - Since full interest is collected upfront and no interest collected in
>>>> remaining installments, it doesn't feel right to accrue interest
>>>> installment wise, especially when the interest is already collected first.
>>>>
>>>> For upfront accrual Accounting
>>>> - the current functionality of accruing whole interest should work
>>>> fine, only question is to have the accrual date as of disbursement date or
>>>> first installment date.
>>>>
>>>> I am not an expert on accounting but this what I feel based on my
>>>> understanding so far.
>>>>
>>>>
>>>> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>
>>>>> Hi Bharath,
>>>>>
>>>>> I hope this email finds you well. Sorry I have already completed the
>>>>> implementation. Please find my comments below.
>>>>>
>>>>> Disbursement amount 10,000$
>>>>> upfront Interest 1,000$
>>>>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting
>>>>> the upfront interest 1000 $ the loan balance will be 10,000 $
>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>      - Nazeer :Yes
>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>     - Nazeer: As we are collecting the interest, 1000$ should be
>>>>> marked as complete interest collected
>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>> 10,000$)
>>>>>    - Nazeer repayment schedule will be generated on 10,000$
>>>>> 3. What will be the Principal and Interest split?
>>>>>   - Nazeer: There won't be any interest component on Repayment
>>>>> Schedule as we already collected interest (For now we are marking as all
>>>>> installments interest paid)
>>>>>
>>>>> Typically, Upfront interest collection will be used for bullet loans
>>>>> (Single Instalments). But our implementation will work even for term loans
>>>>> ( Repayment Schedule count > 0)
>>>>>
>>>>> Thanks
>>>>> Nazeer
>>>>> SSA, Credilinq
>>>>> https://www.credilinq.ai
>>>>>
>>>>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org>
>>>>> wrote:
>>>>>
>>>>>> Hi Nazeer,
>>>>>>
>>>>>> Thank you for creating the JIRA ticket and initiating the discussion.
>>>>>>
>>>>>>  "The problem is the upfront interest amount can't be
>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>> interest paid is a good idea (at least with periodic accruals)."
>>>>>>
>>>>>> With respect to the above comment, it all depends on how we are
>>>>>> handling the upfront interest that is being collected
>>>>>>
>>>>>> For example:
>>>>>>
>>>>>> Disbursement amount 10,000$
>>>>>> upfront Interest 1,000$
>>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>>> 10,000$)
>>>>>> 3. What will be the Principal and Interest split?
>>>>>>
>>>>>> I think we will have to first discuss and agree upon the loan cycle,
>>>>>> schedule behavior and other scenarios use cases and based on that we can
>>>>>> get clarity on accounting entries.
>>>>>> I am happy to discuss further on this and help on documenting the
>>>>>> feature and available next week at any time for the same. let me know if we
>>>>>> can have one discussion next week.
>>>>>>
>>>>>>
>>>>>>
>>>>>> Regards,
>>>>>> Bharath
>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>> <http://www.twitter.com/mifos>
>>>>>>
>>>>>>
>>>>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>
>>>>>>> Hi Bharath,
>>>>>>>
>>>>>>> Thank you. I will create a Jira ticket so that community members can
>>>>>>> update the requirements there.
>>>>>>>
>>>>>>> 1. Cash-based
>>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>>> Account
>>>>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>>>>> on adding interest paid transaction(s) before installment due. I assume
>>>>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>>>>> recalculation config so far.
>>>>>>>
>>>>>>> 2. Accrual (Upfront)
>>>>>>> For this type
>>>>>>> We need to have a receivable account credited first and then would
>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>> Nazeer -> Same as above
>>>>>>>
>>>>>>> 3. Accrual (periodic)
>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>> installment or at a periodic cut-off.
>>>>>>> but the system should accrue if any fees or penalties are introduced
>>>>>>> in the middle of the loan term.
>>>>>>> Nazeer -> Same as above
>>>>>>>
>>>>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org>
>>>>>>> wrote:
>>>>>>>
>>>>>>>> Hi Nazeer,
>>>>>>>>
>>>>>>>> Good to hear from you and happy to see this feature being worked on.
>>>>>>>>  Has a Fineract JIRA been created yet for the same? it will be
>>>>>>>> helpful if you could share the JIRA ticket with the flushed-out functional
>>>>>>>> and implementation details.
>>>>>>>> Curious to know more about what type of product configurations this
>>>>>>>> would be allowed and not allowed. as it would become more complex with
>>>>>>>> daily interest calculations and recalculations enabled.
>>>>>>>>
>>>>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>>>>
>>>>>>>> 1. Cash-based
>>>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>>>> Account
>>>>>>>>
>>>>>>>> 2. Accrual (Upfront)
>>>>>>>> For this type
>>>>>>>> We need to have a receivable account credited first and then would
>>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>>>
>>>>>>>> 3. Accrual (periodic)
>>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>>> installment or at a periodic cut-off.
>>>>>>>> but the system should accrue if any fees or penalties are
>>>>>>>> introduced in the middle of the loan term.
>>>>>>>>
>>>>>>>> Anyone with experience in upfront interest loan products with
>>>>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>>>>> on the same.
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> Regards,
>>>>>>>> Bharath
>>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>>
>>>>>>>>> Hi all,
>>>>>>>>>
>>>>>>>>> Hope this email finds you well. We are planning to implement
>>>>>>>>> upfront interest collection for the loans for some of our business use
>>>>>>>>> cases. With respect to the following 3 accounting configurations, how to
>>>>>>>>> post the journal entries ?
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>    1. Cash Based
>>>>>>>>>    2. Accrual (Up front)
>>>>>>>>>    3. Accrual (Periodic)
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Can we directly post the entry to income from interest GL Account?
>>>>>>>>> Or do we need to have some kind of liability GL account where upfront
>>>>>>>>> collected interest will be posted on this account initially and then moved
>>>>>>>>> to income from the interest account?
>>>>>>>>>
>>>>>>>>> And how the Periodic accrual entries should be posted (As periodic
>>>>>>>>> accrual entries will be accrued and posted per instalment)?
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Thanks,
>>>>>>>>>
>>>>>>>>> Nazeer
>>>>>>>>>
>>>>>>>>> SSA, CrediLinq
>>>>>>>>>
>>>>>>>>> https://www.credilinq.ai
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> --
> Sent from Gmail Mobile
>

Re: Loans - Upfront Interest Collection

[Aleksandar Vidakovic <ch...@monkeysintown.com>]

... it was just to say I can help making things modular, configurable,
reusable... and didn't look in detail at your proposed use case... but I
will. "doesn't matter" means that I can help  without knowing all the
details of the use case... but I will try to catch up over the weekend...

cheers

On Sat, 10 Jun 2023, 05:35 Nazeer Hussain Shaik, <
nazeerhussain.shaik@gmail.com> wrote:

> Hi Aleks,
>
> I am not quite sure I understood your statement -> *It doesn't really
> matter.*
> Can you give some more details please.
>
> Thanks,
> Nazeer
>
> On Fri, Jun 9, 2023 at 11:28 PM Aleksandar Vidakovic <
> cheetah@monkeysintown.com> wrote:
>
>> Hi Nazeer,
>>
>>
>> ... I will have to re-read your proposal, but for what I have to say here
>> it doesn't really matter if I understand it 100%...
>>
>> 1. James mentioned already all important points (modularity,
>> configuration vs. hard-coding, reusability)
>>
>> 2. we can have a 1:1 on Google Meet and I can give more details about the
>> module approach that we currently have in place
>>
>> 3. if there is anything standing in the way to make your feature
>> modular/configurable then let's fix the existing code; example: we had for
>> a long time the concept of repayment strategies (there were 6 included in
>> Fineract); if you looked at the code you could have had the impression that
>> you could add a custom repayment strategy, but no... effectively things
>> were hard-wired (both in code and with database entries); I fixed this a
>> while ago and now you can add any custom repayment strategy you want with
>> simple "application.properties" configuration... just to say let's figure
>> out how we can add your feature so that it can be turned on/off if
>> needed... and by default we leave things as they are
>>
>>
>> ... again, we can talk any time... and I can also help out bulldozering
>> the environment (if needed) to make your feature easily pluggable.
>>
>> Ping me any time.
>>
>> Cheers
>>
>>
>> On 09/06/2023 18:19, Ed Cable wrote:
>>
>> Nazeer,
>>
>> Regarding point 2 here is some documentation on the custom modules
>> approach that Aleks introduced over the past year and has been used by a
>> handful of implementers to make these code-level changes through custom
>> modules without having to deviate from upstream.
>>
>> https://fineract.apache.org/docs/current/#_custom_modules
>>
>> I've made Aleks aware of this thread previously and he should soon be
>> giving some input as to how well the custom module approach might work for
>> the nature of changes you're making.
>>
>> Ed
>>
>> On Fri, Jun 9, 2023 at 8:49 AM James Dailey <ja...@gmail.com>
>> wrote:
>>
>>> Hi Nazeer - I’m trying to wrap my head around how you are defining
>>> income and what limitations you are finding.  Glad to see the discussion.
>>>
>>> Are you planning on making this a contribution to the Fineract code?  If
>>> so, I’d like a lot more details, and some design thinking that’s reflected
>>> in the tickets.
>>>
>>> Generally, and this goes to comments already made, my feeling is:
>>>
>>> The first strategy should be to use configurations  of products and
>>> accounting. If that really fails, then a design analysis should be done to
>>> understand why?  Is the product concept new?  Is there a compelling reason
>>> to include it in a global banking application?  Is it legal and normal in
>>> most jurisdictions?  In other words, does it help the project become
>>> better?
>>>
>>> Then, there are two options at least:
>>> A) create a new configuration concept and propose the code change.
>>> Note, this should be designed to fit a class of issues not just one product
>>> in one institution.  As a rule, it should not break existing features.
>>> Regression Tests may need to be added to ensure that’s the case.
>>>
>>> B) make use of a plug in or Java class replacement concept- I believe
>>> that mechanism is under utilized so might need more explanation or
>>> development.  I’m not sure that would work but worth exploring if it saves
>>> time.
>>>
>>> Thanks
>>> James
>>>
>>>
>>> On Thu, Jun 8, 2023 at 10:48 PM Nazeer Hussain Shaik <
>>> nazeerhussain.shaik@gmail.com> wrote:
>>>
>>>> That depends on your loan disclaimer. If you are saying I am collecting
>>>> 18% interest (for example) you can't collect the charge instead of
>>>> interest. Your income from interest will always be zero which will become
>>>> an issue.
>>>> With respect to accounting (To Bharath) I will get back in the evening
>>>> (Day time IST busy).
>>>>
>>>> Thanks,
>>>> Nazeer
>>>>
>>>> On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io> wrote:
>>>>
>>>>> Hello Nazeer,
>>>>>
>>>>> I concur with Bharath, the existing features should meet your
>>>>> requirements. Since the interest portion is collected at disbursement, you
>>>>> could have the interest collected as a disbursement fee with the interest
>>>>> rate set at 0%.
>>>>>
>>>>> Using your example:
>>>>>
>>>>>    - Principal is 10k
>>>>>    - Interest(disbursement fee) is 10% = 1k
>>>>>    - At disbursement, 10k gets disbursed and 1k collected as
>>>>>    interest(fee) immediately
>>>>>    - Customer gets 9k but pays the full 10k over the loan term
>>>>>
>>>>> Using the above method, cash accounting should work just fine since
>>>>> the interest(fee) has already been paid.
>>>>>
>>>>> These are my thoughts, please correct me if I misunderstood your
>>>>> requirement. Share your documentation to help with testing. I can help with
>>>>> that(testing).
>>>>>
>>>>> Thanks,
>>>>> Ruhiu
>>>>>
>>>>> On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:
>>>>>
>>>>>> Hi Nazeer,
>>>>>>
>>>>>> Thanks for clarifications on the implementation, could you please
>>>>>> help us with implementation notes on configuration and validations on the
>>>>>> implemented changes?
>>>>>> It will be useful for the interested members to test and it also
>>>>>> helps in documenting the same.
>>>>>>
>>>>>> Coming back to the accounting entry discussion
>>>>>>
>>>>>> Since we are collecting the full interest upfront and only principal
>>>>>> over the rest of the installments,
>>>>>> For cash based Accounting
>>>>>> - It does not feel correct to have a liability account approach as
>>>>>> cash based Accounting principal is to effect the income account directly.
>>>>>>
>>>>>> For periodic accrual Accounting
>>>>>> - Since full interest is collected upfront and no interest collected
>>>>>> in remaining installments, it doesn't feel right to accrue interest
>>>>>> installment wise, especially when the interest is already collected first.
>>>>>>
>>>>>> For upfront accrual Accounting
>>>>>> - the current functionality of accruing whole interest should work
>>>>>> fine, only question is to have the accrual date as of disbursement date or
>>>>>> first installment date.
>>>>>>
>>>>>> I am not an expert on accounting but this what I feel based on my
>>>>>> understanding so far.
>>>>>>
>>>>>>
>>>>>> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>
>>>>>>> Hi Bharath,
>>>>>>>
>>>>>>> I hope this email finds you well. Sorry I have already completed the
>>>>>>> implementation. Please find my comments below.
>>>>>>>
>>>>>>> Disbursement amount 10,000$
>>>>>>> upfront Interest 1,000$
>>>>>>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After
>>>>>>> collecting the upfront interest 1000 $ the loan balance will be 10,000 $
>>>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>>>      - Nazeer :Yes
>>>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>>>     - Nazeer: As we are collecting the interest, 1000$ should be
>>>>>>> marked as complete interest collected
>>>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>>>> 10,000$)
>>>>>>>    - Nazeer repayment schedule will be generated on 10,000$
>>>>>>> 3. What will be the Principal and Interest split?
>>>>>>>   - Nazeer: There won't be any interest component on Repayment
>>>>>>> Schedule as we already collected interest (For now we are marking as all
>>>>>>> installments interest paid)
>>>>>>>
>>>>>>> Typically, Upfront interest collection will be used for bullet loans
>>>>>>> (Single Instalments). But our implementation will work even for term loans
>>>>>>> ( Repayment Schedule count > 0)
>>>>>>>
>>>>>>> Thanks
>>>>>>> Nazeer
>>>>>>> SSA, Credilinq
>>>>>>> https://www.credilinq.ai
>>>>>>>
>>>>>>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org>
>>>>>>> wrote:
>>>>>>>
>>>>>>>> Hi Nazeer,
>>>>>>>>
>>>>>>>> Thank you for creating the JIRA ticket and initiating the
>>>>>>>> discussion.
>>>>>>>>
>>>>>>>>  "The problem is the upfront interest amount can't be
>>>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>>>> interest paid is a good idea (at least with periodic accruals)."
>>>>>>>>
>>>>>>>> With respect to the above comment, it all depends on how we are
>>>>>>>> handling the upfront interest that is being collected
>>>>>>>>
>>>>>>>> For example:
>>>>>>>>
>>>>>>>> Disbursement amount 10,000$
>>>>>>>> upfront Interest 1,000$
>>>>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>>>> 1. I assume 1,000$  would be marked collected as of the
>>>>>>>> disbursement date? - that 1000$ collection would get allocated to principal
>>>>>>>> or interest?
>>>>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>>>>> 10,000$)
>>>>>>>> 3. What will be the Principal and Interest split?
>>>>>>>>
>>>>>>>> I think we will have to first discuss and agree upon the loan
>>>>>>>> cycle, schedule behavior and other scenarios use cases and based on that we
>>>>>>>> can get clarity on accounting entries.
>>>>>>>> I am happy to discuss further on this and help on documenting the
>>>>>>>> feature and available next week at any time for the same. let me know if we
>>>>>>>> can have one discussion next week.
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> Regards,
>>>>>>>> Bharath
>>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>>
>>>>>>>>
>>>>>>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>>
>>>>>>>>> Hi Bharath,
>>>>>>>>>
>>>>>>>>> Thank you. I will create a Jira ticket so that community members
>>>>>>>>> can update the requirements there.
>>>>>>>>>
>>>>>>>>> 1. Cash-based
>>>>>>>>> For this, we can directly post the entry to income from interest
>>>>>>>>> GL Account
>>>>>>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>>>>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>>>>>>> on adding interest paid transaction(s) before installment due. I assume
>>>>>>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>>>>>>> recalculation config so far.
>>>>>>>>>
>>>>>>>>> 2. Accrual (Upfront)
>>>>>>>>> For this type
>>>>>>>>> We need to have a receivable account credited first and then would
>>>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>>>> Nazeer -> Same as above
>>>>>>>>>
>>>>>>>>> 3. Accrual (periodic)
>>>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>>>> installment or at a periodic cut-off.
>>>>>>>>> but the system should accrue if any fees or penalties are
>>>>>>>>> introduced in the middle of the loan term.
>>>>>>>>> Nazeer -> Same as above
>>>>>>>>>
>>>>>>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org>
>>>>>>>>> wrote:
>>>>>>>>>
>>>>>>>>>> Hi Nazeer,
>>>>>>>>>>
>>>>>>>>>> Good to hear from you and happy to see this feature being worked
>>>>>>>>>> on.
>>>>>>>>>>  Has a Fineract JIRA been created yet for the same? it will be
>>>>>>>>>> helpful if you could share the JIRA ticket with the flushed-out functional
>>>>>>>>>> and implementation details.
>>>>>>>>>> Curious to know more about what type of product configurations
>>>>>>>>>> this would be allowed and not allowed. as it would become more complex with
>>>>>>>>>> daily interest calculations and recalculations enabled.
>>>>>>>>>>
>>>>>>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>>>>>>
>>>>>>>>>> 1. Cash-based
>>>>>>>>>> For this, we can directly post the entry to income from interest
>>>>>>>>>> GL Account
>>>>>>>>>>
>>>>>>>>>> 2. Accrual (Upfront)
>>>>>>>>>> For this type
>>>>>>>>>> We need to have a receivable account credited first and then
>>>>>>>>>> would be moved to the Income GL account when the payment comes in
>>>>>>>>>>
>>>>>>>>>> 3. Accrual (periodic)
>>>>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>>>>> installment or at a periodic cut-off.
>>>>>>>>>> but the system should accrue if any fees or penalties are
>>>>>>>>>> introduced in the middle of the loan term.
>>>>>>>>>>
>>>>>>>>>> Anyone with experience in upfront interest loan products with
>>>>>>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>>>>>>> on the same.
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>> Regards,
>>>>>>>>>> Bharath
>>>>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>>>>
>>>>>>>>>>> Hi all,
>>>>>>>>>>>
>>>>>>>>>>> Hope this email finds you well. We are planning to implement
>>>>>>>>>>> upfront interest collection for the loans for some of our business use
>>>>>>>>>>> cases. With respect to the following 3 accounting configurations, how to
>>>>>>>>>>> post the journal entries ?
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>>    1. Cash Based
>>>>>>>>>>>    2. Accrual (Up front)
>>>>>>>>>>>    3. Accrual (Periodic)
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>> Can we directly post the entry to income from interest GL
>>>>>>>>>>> Account? Or do we need to have some kind of liability GL account where
>>>>>>>>>>> upfront collected interest will be posted on this account initially and
>>>>>>>>>>> then moved to income from the interest account?
>>>>>>>>>>>
>>>>>>>>>>> And how the Periodic accrual entries should be posted (As
>>>>>>>>>>> periodic accrual entries will be accrued and posted per instalment)?
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>> Thanks,
>>>>>>>>>>>
>>>>>>>>>>> Nazeer
>>>>>>>>>>>
>>>>>>>>>>> SSA, CrediLinq
>>>>>>>>>>>
>>>>>>>>>>> https://www.credilinq.ai
>>>>>>>>>>>
>>>>>>>>>>>
>>>>>>>>>>> --
>>> Sent from Gmail Mobile
>>>
>>
>>
>> --
>> *Ed Cable*
>> President/CEO, Mifos Initiative
>> edcable@mifos.org | Skype: edcable | Mobile: +1.484.477.8649
>>
>> *Collectively Creating a World of 3 Billion Maries | *http://mifos.org
>> <http://facebook.com/mifos>  <http://www.twitter.com/mifos>
>>
>>

Re: Loans - Upfront Interest Collection

[Nazeer Hussain Shaik <na...@gmail.com>]

Hi Aleks,

I am not quite sure I understood your statement -> *It doesn't really
matter.*
Can you give some more details please.

Thanks,
Nazeer

On Fri, Jun 9, 2023 at 11:28 PM Aleksandar Vidakovic <
cheetah@monkeysintown.com> wrote:

> Hi Nazeer,
>
>
> ... I will have to re-read your proposal, but for what I have to say here
> it doesn't really matter if I understand it 100%...
>
> 1. James mentioned already all important points (modularity, configuration
> vs. hard-coding, reusability)
>
> 2. we can have a 1:1 on Google Meet and I can give more details about the
> module approach that we currently have in place
>
> 3. if there is anything standing in the way to make your feature
> modular/configurable then let's fix the existing code; example: we had for
> a long time the concept of repayment strategies (there were 6 included in
> Fineract); if you looked at the code you could have had the impression that
> you could add a custom repayment strategy, but no... effectively things
> were hard-wired (both in code and with database entries); I fixed this a
> while ago and now you can add any custom repayment strategy you want with
> simple "application.properties" configuration... just to say let's figure
> out how we can add your feature so that it can be turned on/off if
> needed... and by default we leave things as they are
>
>
> ... again, we can talk any time... and I can also help out bulldozering
> the environment (if needed) to make your feature easily pluggable.
>
> Ping me any time.
>
> Cheers
>
>
> On 09/06/2023 18:19, Ed Cable wrote:
>
> Nazeer,
>
> Regarding point 2 here is some documentation on the custom modules
> approach that Aleks introduced over the past year and has been used by a
> handful of implementers to make these code-level changes through custom
> modules without having to deviate from upstream.
>
> https://fineract.apache.org/docs/current/#_custom_modules
>
> I've made Aleks aware of this thread previously and he should soon be
> giving some input as to how well the custom module approach might work for
> the nature of changes you're making.
>
> Ed
>
> On Fri, Jun 9, 2023 at 8:49 AM James Dailey <ja...@gmail.com>
> wrote:
>
>> Hi Nazeer - I’m trying to wrap my head around how you are defining income
>> and what limitations you are finding.  Glad to see the discussion.
>>
>> Are you planning on making this a contribution to the Fineract code?  If
>> so, I’d like a lot more details, and some design thinking that’s reflected
>> in the tickets.
>>
>> Generally, and this goes to comments already made, my feeling is:
>>
>> The first strategy should be to use configurations  of products and
>> accounting. If that really fails, then a design analysis should be done to
>> understand why?  Is the product concept new?  Is there a compelling reason
>> to include it in a global banking application?  Is it legal and normal in
>> most jurisdictions?  In other words, does it help the project become
>> better?
>>
>> Then, there are two options at least:
>> A) create a new configuration concept and propose the code change.  Note,
>> this should be designed to fit a class of issues not just one product in
>> one institution.  As a rule, it should not break existing features.
>> Regression Tests may need to be added to ensure that’s the case.
>>
>> B) make use of a plug in or Java class replacement concept- I believe
>> that mechanism is under utilized so might need more explanation or
>> development.  I’m not sure that would work but worth exploring if it saves
>> time.
>>
>> Thanks
>> James
>>
>>
>> On Thu, Jun 8, 2023 at 10:48 PM Nazeer Hussain Shaik <
>> nazeerhussain.shaik@gmail.com> wrote:
>>
>>> That depends on your loan disclaimer. If you are saying I am collecting
>>> 18% interest (for example) you can't collect the charge instead of
>>> interest. Your income from interest will always be zero which will become
>>> an issue.
>>> With respect to accounting (To Bharath) I will get back in the evening
>>> (Day time IST busy).
>>>
>>> Thanks,
>>> Nazeer
>>>
>>> On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io> wrote:
>>>
>>>> Hello Nazeer,
>>>>
>>>> I concur with Bharath, the existing features should meet your
>>>> requirements. Since the interest portion is collected at disbursement, you
>>>> could have the interest collected as a disbursement fee with the interest
>>>> rate set at 0%.
>>>>
>>>> Using your example:
>>>>
>>>>    - Principal is 10k
>>>>    - Interest(disbursement fee) is 10% = 1k
>>>>    - At disbursement, 10k gets disbursed and 1k collected as
>>>>    interest(fee) immediately
>>>>    - Customer gets 9k but pays the full 10k over the loan term
>>>>
>>>> Using the above method, cash accounting should work just fine since the
>>>> interest(fee) has already been paid.
>>>>
>>>> These are my thoughts, please correct me if I misunderstood your
>>>> requirement. Share your documentation to help with testing. I can help with
>>>> that(testing).
>>>>
>>>> Thanks,
>>>> Ruhiu
>>>>
>>>> On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:
>>>>
>>>>> Hi Nazeer,
>>>>>
>>>>> Thanks for clarifications on the implementation, could you please help
>>>>> us with implementation notes on configuration and validations on the
>>>>> implemented changes?
>>>>> It will be useful for the interested members to test and it also helps
>>>>> in documenting the same.
>>>>>
>>>>> Coming back to the accounting entry discussion
>>>>>
>>>>> Since we are collecting the full interest upfront and only principal
>>>>> over the rest of the installments,
>>>>> For cash based Accounting
>>>>> - It does not feel correct to have a liability account approach as
>>>>> cash based Accounting principal is to effect the income account directly.
>>>>>
>>>>> For periodic accrual Accounting
>>>>> - Since full interest is collected upfront and no interest collected
>>>>> in remaining installments, it doesn't feel right to accrue interest
>>>>> installment wise, especially when the interest is already collected first.
>>>>>
>>>>> For upfront accrual Accounting
>>>>> - the current functionality of accruing whole interest should work
>>>>> fine, only question is to have the accrual date as of disbursement date or
>>>>> first installment date.
>>>>>
>>>>> I am not an expert on accounting but this what I feel based on my
>>>>> understanding so far.
>>>>>
>>>>>
>>>>> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>
>>>>>> Hi Bharath,
>>>>>>
>>>>>> I hope this email finds you well. Sorry I have already completed the
>>>>>> implementation. Please find my comments below.
>>>>>>
>>>>>> Disbursement amount 10,000$
>>>>>> upfront Interest 1,000$
>>>>>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting
>>>>>> the upfront interest 1000 $ the loan balance will be 10,000 $
>>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>>      - Nazeer :Yes
>>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>>     - Nazeer: As we are collecting the interest, 1000$ should be
>>>>>> marked as complete interest collected
>>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>>> 10,000$)
>>>>>>    - Nazeer repayment schedule will be generated on 10,000$
>>>>>> 3. What will be the Principal and Interest split?
>>>>>>   - Nazeer: There won't be any interest component on Repayment
>>>>>> Schedule as we already collected interest (For now we are marking as all
>>>>>> installments interest paid)
>>>>>>
>>>>>> Typically, Upfront interest collection will be used for bullet loans
>>>>>> (Single Instalments). But our implementation will work even for term loans
>>>>>> ( Repayment Schedule count > 0)
>>>>>>
>>>>>> Thanks
>>>>>> Nazeer
>>>>>> SSA, Credilinq
>>>>>> https://www.credilinq.ai
>>>>>>
>>>>>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org>
>>>>>> wrote:
>>>>>>
>>>>>>> Hi Nazeer,
>>>>>>>
>>>>>>> Thank you for creating the JIRA ticket and initiating the discussion.
>>>>>>>
>>>>>>>  "The problem is the upfront interest amount can't be
>>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>>> interest paid is a good idea (at least with periodic accruals)."
>>>>>>>
>>>>>>> With respect to the above comment, it all depends on how we are
>>>>>>> handling the upfront interest that is being collected
>>>>>>>
>>>>>>> For example:
>>>>>>>
>>>>>>> Disbursement amount 10,000$
>>>>>>> upfront Interest 1,000$
>>>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>>>> 10,000$)
>>>>>>> 3. What will be the Principal and Interest split?
>>>>>>>
>>>>>>> I think we will have to first discuss and agree upon the loan cycle,
>>>>>>> schedule behavior and other scenarios use cases and based on that we can
>>>>>>> get clarity on accounting entries.
>>>>>>> I am happy to discuss further on this and help on documenting the
>>>>>>> feature and available next week at any time for the same. let me know if we
>>>>>>> can have one discussion next week.
>>>>>>>
>>>>>>>
>>>>>>>
>>>>>>> Regards,
>>>>>>> Bharath
>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>
>>>>>>>
>>>>>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>
>>>>>>>> Hi Bharath,
>>>>>>>>
>>>>>>>> Thank you. I will create a Jira ticket so that community members
>>>>>>>> can update the requirements there.
>>>>>>>>
>>>>>>>> 1. Cash-based
>>>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>>>> Account
>>>>>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>>>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>>>>>> on adding interest paid transaction(s) before installment due. I assume
>>>>>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>>>>>> recalculation config so far.
>>>>>>>>
>>>>>>>> 2. Accrual (Upfront)
>>>>>>>> For this type
>>>>>>>> We need to have a receivable account credited first and then would
>>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>>> Nazeer -> Same as above
>>>>>>>>
>>>>>>>> 3. Accrual (periodic)
>>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>>> installment or at a periodic cut-off.
>>>>>>>> but the system should accrue if any fees or penalties are
>>>>>>>> introduced in the middle of the loan term.
>>>>>>>> Nazeer -> Same as above
>>>>>>>>
>>>>>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org>
>>>>>>>> wrote:
>>>>>>>>
>>>>>>>>> Hi Nazeer,
>>>>>>>>>
>>>>>>>>> Good to hear from you and happy to see this feature being worked
>>>>>>>>> on.
>>>>>>>>>  Has a Fineract JIRA been created yet for the same? it will be
>>>>>>>>> helpful if you could share the JIRA ticket with the flushed-out functional
>>>>>>>>> and implementation details.
>>>>>>>>> Curious to know more about what type of product configurations
>>>>>>>>> this would be allowed and not allowed. as it would become more complex with
>>>>>>>>> daily interest calculations and recalculations enabled.
>>>>>>>>>
>>>>>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>>>>>
>>>>>>>>> 1. Cash-based
>>>>>>>>> For this, we can directly post the entry to income from interest
>>>>>>>>> GL Account
>>>>>>>>>
>>>>>>>>> 2. Accrual (Upfront)
>>>>>>>>> For this type
>>>>>>>>> We need to have a receivable account credited first and then would
>>>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>>>>
>>>>>>>>> 3. Accrual (periodic)
>>>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>>>> installment or at a periodic cut-off.
>>>>>>>>> but the system should accrue if any fees or penalties are
>>>>>>>>> introduced in the middle of the loan term.
>>>>>>>>>
>>>>>>>>> Anyone with experience in upfront interest loan products with
>>>>>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>>>>>> on the same.
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Regards,
>>>>>>>>> Bharath
>>>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>>>
>>>>>>>>>> Hi all,
>>>>>>>>>>
>>>>>>>>>> Hope this email finds you well. We are planning to implement
>>>>>>>>>> upfront interest collection for the loans for some of our business use
>>>>>>>>>> cases. With respect to the following 3 accounting configurations, how to
>>>>>>>>>> post the journal entries ?
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>    1. Cash Based
>>>>>>>>>>    2. Accrual (Up front)
>>>>>>>>>>    3. Accrual (Periodic)
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>> Can we directly post the entry to income from interest GL
>>>>>>>>>> Account? Or do we need to have some kind of liability GL account where
>>>>>>>>>> upfront collected interest will be posted on this account initially and
>>>>>>>>>> then moved to income from the interest account?
>>>>>>>>>>
>>>>>>>>>> And how the Periodic accrual entries should be posted (As
>>>>>>>>>> periodic accrual entries will be accrued and posted per instalment)?
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>> Thanks,
>>>>>>>>>>
>>>>>>>>>> Nazeer
>>>>>>>>>>
>>>>>>>>>> SSA, CrediLinq
>>>>>>>>>>
>>>>>>>>>> https://www.credilinq.ai
>>>>>>>>>>
>>>>>>>>>>
>>>>>>>>>> --
>> Sent from Gmail Mobile
>>
>
>
> --
> *Ed Cable*
> President/CEO, Mifos Initiative
> edcable@mifos.org | Skype: edcable | Mobile: +1.484.477.8649
>
> *Collectively Creating a World of 3 Billion Maries | *http://mifos.org
> <http://facebook.com/mifos>  <http://www.twitter.com/mifos>
>
>

Re: Loans - Upfront Interest Collection

[Aleksandar Vidakovic <ch...@monkeysintown.com>]

Hi Nazeer,


... I will have to re-read your proposal, but for what I have to say 
here it doesn't really matter if I understand it 100%...

1. James mentioned already all important points (modularity, 
configuration vs. hard-coding, reusability)

2. we can have a 1:1 on Google Meet and I can give more details about 
the module approach that we currently have in place

3. if there is anything standing in the way to make your feature 
modular/configurable then let's fix the existing code; example: we had 
for a long time the concept of repayment strategies (there were 6 
included in Fineract); if you looked at the code you could have had the 
impression that you could add a custom repayment strategy, but no... 
effectively things were hard-wired (both in code and with database 
entries); I fixed this a while ago and now you can add any custom 
repayment strategy you want with simple "application.properties" 
configuration... just to say let's figure out how we can add your 
feature so that it can be turned on/off if needed... and by default we 
leave things as they are


... again, we can talk any time... and I can also help out bulldozering 
the environment (if needed) to make your feature easily pluggable.

Ping me any time.

Cheers


On 09/06/2023 18:19, Ed Cable wrote:
> Nazeer,
>
> Regarding point 2 here is some documentation on the custom modules 
> approach that Aleks introduced over the past year and has been used by 
> a handful of implementers to make these code-level changes through 
> custom modules without having to deviate from upstream.
>
> https://fineract.apache.org/docs/current/#_custom_modules
>
> I've made Aleks aware of this thread previously and he should soon be 
> giving some input as to how well the custom module approach might work 
> for the nature of changes you're making.
>
> Ed
>
> On Fri, Jun 9, 2023 at 8:49 AM James Dailey <ja...@gmail.com> 
> wrote:
>
>     Hi Nazeer - I’m trying to wrap my head around how you are defining
>     income and what limitations you are finding.  Glad to see the
>     discussion.
>
>     Are you planning on making this a contribution to the Fineract
>     code?  If so, I’d like a lot more details, and some design
>     thinking that’s reflected in the tickets.
>
>     Generally, and this goes to comments already made, my feeling is:
>
>     The first strategy should be to use configurations  of products
>     and accounting. If that really fails, then a design analysis
>     should be done to understand why?  Is the product concept new?  Is
>     there a compelling reason to include it in a global banking
>     application?  Is it legal and normal in most jurisdictions? 
>     In other words, does it help the project become better?
>
>     Then, there are two options at least:
>     A) create a new configuration concept and propose the code
>     change.  Note, this should be designed to fit a class of issues
>     not just one product in one institution.  As a rule, it should not
>     break existing features. Regression Tests may need to be added to
>     ensure that’s the case.
>
>     B) make use of a plug in or Java class replacement concept- I
>     believe that mechanism is under utilized so might need more
>     explanation or development.  I’m not sure that would work but
>     worth exploring if it saves time.
>
>     Thanks
>     James
>
>
>     On Thu, Jun 8, 2023 at 10:48 PM Nazeer Hussain Shaik
>     <na...@gmail.com> wrote:
>
>         That depends on your loan disclaimer. If you are saying I am
>         collecting 18% interest (for example) you can't collect the
>         charge instead of interest. Your income from interest will
>         always be zero which will become an issue.
>         With respect to accounting (To Bharath) I will get back in the
>         evening (Day time IST busy).
>
>         Thanks,
>         Nazeer
>
>         On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io>
>         wrote:
>
>             Hello Nazeer,
>
>             I concur with Bharath, the existing features should meet
>             your requirements. Since the interest portion is collected
>             at disbursement, you could have the interest collected as
>             a disbursement fee with the interest rate set at 0%.
>
>             Using your example:
>
>               * Principal is 10k
>               * Interest(disbursement fee) is 10% = 1k
>               * At disbursement, 10k gets disbursed and 1k collected
>                 as interest(fee) immediately
>               * Customer gets 9k but pays the full 10k over the loan term
>
>             Using the above method, cash accounting should work
>             just fine since the interest(fee) has already been paid.
>
>             These are my thoughts, please correct me if I
>             misunderstood your requirement. Share your documentation
>             to help with testing. I can help with that(testing).
>
>             Thanks,
>             Ruhiu
>
>             On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda
>             <bg...@mifos.org> wrote:
>
>                 Hi Nazeer,
>
>                 Thanks for clarifications on the implementation, could
>                 you please help us with implementation notes on
>                 configuration and validations on the implemented changes?
>                 It will be useful for the interested members to test
>                 and it also helps in documenting the same.
>
>                 Coming back to the accounting entry discussion
>
>                 Since we are collecting the full interest upfront and
>                 only principal over the rest of the installments,
>                 For cash based Accounting
>                 - It does not feel correct to have a liability account
>                 approach as cash based Accounting principal is to
>                 effect the income account directly.
>
>                 For periodic accrual Accounting
>                 - Since full interest is collected upfront and no
>                 interest collected in remaining installments, it
>                 doesn't feel right to accrue interest installment
>                 wise, especially when the interest is already
>                 collected first.
>
>                 For upfront accrual Accounting
>                 - the current functionality of accruing whole interest
>                 should work fine, only question is to have the accrual
>                 date as of disbursement date or first installment date.
>
>                 I am not an expert on accounting but this what I feel
>                 based on my understanding so far.
>
>
>                 On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik
>                 <na...@gmail.com> wrote:
>
>                     Hi Bharath,
>
>                     I hope this email finds you well. Sorry I have
>                     already completed the implementation. Please find
>                     my comments below.
>
>                     Disbursement amount 10,000$
>                     upfront Interest 1,000$
>                       - Nazeer: Total loan balance -> 10,000 $ + 1000
>                     $. After collecting the upfront interest 1000 $
>                     the loan balance will be 10,000 $
>                     So if we actually disburse only 9,000 $ and
>                     collect back 10,000 $
>                          - Nazeer :Yes
>                     1. I assume 1,000$  would be marked collected as
>                     of the disbursement date? - that 1000$ collection
>                     would get allocated to principal or interest?
>                         - Nazeer: As we are collecting the interest,
>                     1000$ should be marked as complete interest collected
>                     2. On what amount of repayment schedule will be
>                     generated? (9000 or 10,000$)
>                        - Nazeer repayment schedule will be generated
>                     on 10,000$
>                     3. What will be the Principal and Interest split?
>                       - Nazeer: There won't be any interest component
>                     on Repayment Schedule as we already collected
>                     interest (For now we are marking as all
>                     installments interest paid)
>
>                     Typically, Upfront interest collection will be
>                     used for bullet loans (Single Instalments). But
>                     our implementation will work even for term loans (
>                     Repayment Schedule count > 0)
>
>                     Thanks
>                     Nazeer
>                     SSA, Credilinq
>                     https://www.credilinq.ai
>
>                     On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda
>                     <bg...@mifos.org> wrote:
>
>                         Hi Nazeer,
>
>                         Thank you for creating the JIRA ticket and
>                         initiating the discussion.
>
>                          "The problem is the upfront interest amount
>                         can't be posted directory to GL Account as I
>                         am not sure marking future installments
>                         interest paid is a good idea (at least with
>                         periodic accruals)."
>
>                         With respect to the above comment, it all
>                         depends on how we are handling the upfront
>                         interest that is being collected
>
>                         For example:
>
>                         Disbursement amount 10,000$
>                         upfront Interest 1,000$
>                         So if we actually disburse only 9,000 $ and
>                         collect back 10,000 $
>                         1. I assume 1,000$  would be marked collected
>                         as of the disbursement date? - that 1000$
>                         collection would get allocated to principal or
>                         interest?
>                         2. On what amount of repayment schedule will
>                         be generated? (9000 or 10,000$)
>                         3. What will be the Principal and Interest split?
>
>                         I think we will have to first discuss and
>                         agree upon the loan cycle, schedule behavior
>                         and other scenarios use cases and based on
>                         that we can get clarity on accounting entries.
>                         I am happy to discuss further on this and help
>                         on documenting the feature and available next
>                         week at any time for the same. let me know if
>                         we can have one discussion next week.
>
>
>
>                         Regards,
>                         Bharath
>                         Lead Implementation Analyst | Mifos Initiative
>                         Skype: live:cbharath4| Mobile: +91.7019635592
>                         http://mifos.org<http://facebook.com/mifos>//<http://www.twitter.com/mifos>
>
>
>                         On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain
>                         Shaik <na...@gmail.com> wrote:
>
>                             Hi Bharath,
>
>                             Thank you. I will create a Jira ticket so
>                             that community members can update the
>                             requirements there.
>
>                             1. Cash-based
>                             For this, we can directly post the entry
>                             to income from interest GL Account
>                             Nazeer -> The problem is the upfront
>                             interest amount can't be posted directory
>                             to GL Account as I am not sure marking
>                             future installments interest paid is a
>                             good idea (at least with periodic
>                             accruals). So I am thinking of keeping the
>                             upfront interest on Liability GL account
>                             and keep on adding interest paid
>                             transaction(s) before installment due. I
>                             assume this works for 3 accounting
>                             scenarios. I haven't thought about
>                             interest recalculation config so far.
>
>                             2. Accrual (Upfront)
>                             For this type
>                             We need to have a receivable account
>                             credited first and then would be moved to
>                             the Income GL account when the payment
>                             comes in
>                             Nazeer -> Same as above
>
>                             3. Accrual (periodic)
>                             Since on the business side, the Income
>                             amount is being collected upfront I do not
>                             think it is correct to have interest
>                             accruals at the installment or at a
>                             periodic cut-off.
>                             but the system should accrue if any fees
>                             or penalties are introduced in the middle
>                             of the loan term.
>                             Nazeer -> Same as above
>
>                             On Thu, Jun 1, 2023 at 12:22 PM Bharath
>                             Gowda <bg...@mifos.org> wrote:
>
>                                 Hi Nazeer,
>
>                                 Good to hear from you and happy to see
>                                 this feature being worked on.
>                                  Has a Fineract JIRA been created yet
>                                 for the same? it will be helpful if
>                                 you could share the JIRA ticket with
>                                 the flushed-out functional and
>                                 implementation details.
>                                 Curious to know more about what type
>                                 of product configurations this would
>                                 be allowed and not allowed. as it
>                                 would become more complex with daily
>                                 interest calculations and
>                                 recalculations enabled.
>
>                                 Here are my 2 cents on the
>                                 accounting entry for the same
>
>                                 1. Cash-based
>                                 For this, we can directly post the
>                                 entry to income from interest GL Account
>
>                                 2. Accrual (Upfront)
>                                 For this type
>                                 We need to have a receivable account
>                                 credited first and then would be moved
>                                 to the Income GL account when the
>                                 payment comes in
>
>                                 3. Accrual (periodic)
>                                 Since on the business side, the Income
>                                 amount is being collected upfront I do
>                                 not think it is correct to have
>                                 interest accruals at the installment
>                                 or at a periodic cut-off.
>                                 but the system should accrue if any
>                                 fees or penalties are introduced in
>                                 the middle of the loan term.
>
>                                 Anyone with experience in upfront
>                                 interest loan products with
>                                 accrual-based accounting, feel free to
>                                 correct me and share your thoughts on
>                                 the same.
>
>
>
>                                 Regards,
>                                 Bharath
>                                 Lead Implementation Analyst | Mifos
>                                 Initiative
>                                 Skype: live:cbharath4| Mobile:
>                                 +91.7019635592
>                                 http://mifos.org<http://facebook.com/mifos>//<http://www.twitter.com/mifos>
>
>
>
>                                 On Thu, Jun 1, 2023 at 12:03 AM Nazeer
>                                 Hussain Shaik
>                                 <na...@gmail.com> wrote:
>
>                                     Hi all,
>
>                                     Hope this email finds you well. We
>                                     are planning to implement upfront
>                                     interest collection for the loans
>                                     for some of our business use
>                                     cases. With respect to the
>                                     following 3 accounting
>                                     configurations, how to post the
>                                     journal entries ?
>
>
>                                      1. Cash Based
>                                      2. Accrual (Up front)
>                                      3. Accrual (Periodic)
>
>
>                                     Can we directly post the entry to
>                                     income from interest GL Account?
>                                     Or do we need to have some kind of
>                                     liability GL account where upfront
>                                     collected interest will be posted
>                                     on this account initially and then
>                                     moved to income from the interest
>                                     account?
>
>                                     And how the Periodic accrual
>                                     entries should be posted (As
>                                     periodic accrual entries will be
>                                     accrued and posted per instalment)?
>
>
>                                     Thanks,
>
>                                     Nazeer
>
>                                     SSA, CrediLinq
>
>                                     https://www.credilinq.ai
>
>
>
>     -- 
>     Sent from Gmail Mobile
>
>
>
> -- 
> *Ed Cable*
> President/CEO, Mifos Initiative
> edcable@mifos.org | Skype: edcable | Mobile: +1.484.477.8649
>
> *Collectively Creating a World of 3 Billion Maries | *http://mifos.org 
> <http://facebook.com/mifos>//<http://www.twitter.com/mifos>
>

Re: Loans - Upfront Interest Collection

[Ed Cable <ed...@mifos.org>]

Nazeer,

Regarding point 2 here is some documentation on the custom modules
approach that Aleks introduced over the past year and has been used by a
handful of implementers to make these code-level changes through custom
modules without having to deviate from upstream.

https://fineract.apache.org/docs/current/#_custom_modules

I've made Aleks aware of this thread previously and he should soon be
giving some input as to how well the custom module approach might work for
the nature of changes you're making.

Ed

On Fri, Jun 9, 2023 at 8:49 AM James Dailey <ja...@gmail.com> wrote:

> Hi Nazeer - I’m trying to wrap my head around how you are defining income
> and what limitations you are finding.  Glad to see the discussion.
>
> Are you planning on making this a contribution to the Fineract code?  If
> so, I’d like a lot more details, and some design thinking that’s reflected
> in the tickets.
>
> Generally, and this goes to comments already made, my feeling is:
>
> The first strategy should be to use configurations  of products and
> accounting. If that really fails, then a design analysis should be done to
> understand why?  Is the product concept new?  Is there a compelling reason
> to include it in a global banking application?  Is it legal and normal in
> most jurisdictions?  In other words, does it help the project become
> better?
>
> Then, there are two options at least:
> A) create a new configuration concept and propose the code change.  Note,
> this should be designed to fit a class of issues not just one product in
> one institution.  As a rule, it should not break existing features.
> Regression Tests may need to be added to ensure that’s the case.
>
> B) make use of a plug in or Java class replacement concept- I believe that
> mechanism is under utilized so might need more explanation or development.
> I’m not sure that would work but worth exploring if it saves time.
>
> Thanks
> James
>
>
> On Thu, Jun 8, 2023 at 10:48 PM Nazeer Hussain Shaik <
> nazeerhussain.shaik@gmail.com> wrote:
>
>> That depends on your loan disclaimer. If you are saying I am collecting
>> 18% interest (for example) you can't collect the charge instead of
>> interest. Your income from interest will always be zero which will become
>> an issue.
>> With respect to accounting (To Bharath) I will get back in the evening
>> (Day time IST busy).
>>
>> Thanks,
>> Nazeer
>>
>> On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io> wrote:
>>
>>> Hello Nazeer,
>>>
>>> I concur with Bharath, the existing features should meet your
>>> requirements. Since the interest portion is collected at disbursement, you
>>> could have the interest collected as a disbursement fee with the interest
>>> rate set at 0%.
>>>
>>> Using your example:
>>>
>>>    - Principal is 10k
>>>    - Interest(disbursement fee) is 10% = 1k
>>>    - At disbursement, 10k gets disbursed and 1k collected as
>>>    interest(fee) immediately
>>>    - Customer gets 9k but pays the full 10k over the loan term
>>>
>>> Using the above method, cash accounting should work just fine since the
>>> interest(fee) has already been paid.
>>>
>>> These are my thoughts, please correct me if I misunderstood your
>>> requirement. Share your documentation to help with testing. I can help with
>>> that(testing).
>>>
>>> Thanks,
>>> Ruhiu
>>>
>>> On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:
>>>
>>>> Hi Nazeer,
>>>>
>>>> Thanks for clarifications on the implementation, could you please help
>>>> us with implementation notes on configuration and validations on the
>>>> implemented changes?
>>>> It will be useful for the interested members to test and it also helps
>>>> in documenting the same.
>>>>
>>>> Coming back to the accounting entry discussion
>>>>
>>>> Since we are collecting the full interest upfront and only principal
>>>> over the rest of the installments,
>>>> For cash based Accounting
>>>> - It does not feel correct to have a liability account approach as cash
>>>> based Accounting principal is to effect the income account directly.
>>>>
>>>> For periodic accrual Accounting
>>>> - Since full interest is collected upfront and no interest collected in
>>>> remaining installments, it doesn't feel right to accrue interest
>>>> installment wise, especially when the interest is already collected first.
>>>>
>>>> For upfront accrual Accounting
>>>> - the current functionality of accruing whole interest should work
>>>> fine, only question is to have the accrual date as of disbursement date or
>>>> first installment date.
>>>>
>>>> I am not an expert on accounting but this what I feel based on my
>>>> understanding so far.
>>>>
>>>>
>>>> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>
>>>>> Hi Bharath,
>>>>>
>>>>> I hope this email finds you well. Sorry I have already completed the
>>>>> implementation. Please find my comments below.
>>>>>
>>>>> Disbursement amount 10,000$
>>>>> upfront Interest 1,000$
>>>>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting
>>>>> the upfront interest 1000 $ the loan balance will be 10,000 $
>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>      - Nazeer :Yes
>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>     - Nazeer: As we are collecting the interest, 1000$ should be
>>>>> marked as complete interest collected
>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>> 10,000$)
>>>>>    - Nazeer repayment schedule will be generated on 10,000$
>>>>> 3. What will be the Principal and Interest split?
>>>>>   - Nazeer: There won't be any interest component on Repayment
>>>>> Schedule as we already collected interest (For now we are marking as all
>>>>> installments interest paid)
>>>>>
>>>>> Typically, Upfront interest collection will be used for bullet loans
>>>>> (Single Instalments). But our implementation will work even for term loans
>>>>> ( Repayment Schedule count > 0)
>>>>>
>>>>> Thanks
>>>>> Nazeer
>>>>> SSA, Credilinq
>>>>> https://www.credilinq.ai
>>>>>
>>>>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org>
>>>>> wrote:
>>>>>
>>>>>> Hi Nazeer,
>>>>>>
>>>>>> Thank you for creating the JIRA ticket and initiating the discussion.
>>>>>>
>>>>>>  "The problem is the upfront interest amount can't be
>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>> interest paid is a good idea (at least with periodic accruals)."
>>>>>>
>>>>>> With respect to the above comment, it all depends on how we are
>>>>>> handling the upfront interest that is being collected
>>>>>>
>>>>>> For example:
>>>>>>
>>>>>> Disbursement amount 10,000$
>>>>>> upfront Interest 1,000$
>>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>>> 10,000$)
>>>>>> 3. What will be the Principal and Interest split?
>>>>>>
>>>>>> I think we will have to first discuss and agree upon the loan cycle,
>>>>>> schedule behavior and other scenarios use cases and based on that we can
>>>>>> get clarity on accounting entries.
>>>>>> I am happy to discuss further on this and help on documenting the
>>>>>> feature and available next week at any time for the same. let me know if we
>>>>>> can have one discussion next week.
>>>>>>
>>>>>>
>>>>>>
>>>>>> Regards,
>>>>>> Bharath
>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>> <http://www.twitter.com/mifos>
>>>>>>
>>>>>>
>>>>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>
>>>>>>> Hi Bharath,
>>>>>>>
>>>>>>> Thank you. I will create a Jira ticket so that community members can
>>>>>>> update the requirements there.
>>>>>>>
>>>>>>> 1. Cash-based
>>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>>> Account
>>>>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>>>>> on adding interest paid transaction(s) before installment due. I assume
>>>>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>>>>> recalculation config so far.
>>>>>>>
>>>>>>> 2. Accrual (Upfront)
>>>>>>> For this type
>>>>>>> We need to have a receivable account credited first and then would
>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>> Nazeer -> Same as above
>>>>>>>
>>>>>>> 3. Accrual (periodic)
>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>> installment or at a periodic cut-off.
>>>>>>> but the system should accrue if any fees or penalties are introduced
>>>>>>> in the middle of the loan term.
>>>>>>> Nazeer -> Same as above
>>>>>>>
>>>>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org>
>>>>>>> wrote:
>>>>>>>
>>>>>>>> Hi Nazeer,
>>>>>>>>
>>>>>>>> Good to hear from you and happy to see this feature being worked on.
>>>>>>>>  Has a Fineract JIRA been created yet for the same? it will be
>>>>>>>> helpful if you could share the JIRA ticket with the flushed-out functional
>>>>>>>> and implementation details.
>>>>>>>> Curious to know more about what type of product configurations this
>>>>>>>> would be allowed and not allowed. as it would become more complex with
>>>>>>>> daily interest calculations and recalculations enabled.
>>>>>>>>
>>>>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>>>>
>>>>>>>> 1. Cash-based
>>>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>>>> Account
>>>>>>>>
>>>>>>>> 2. Accrual (Upfront)
>>>>>>>> For this type
>>>>>>>> We need to have a receivable account credited first and then would
>>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>>>
>>>>>>>> 3. Accrual (periodic)
>>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>>> installment or at a periodic cut-off.
>>>>>>>> but the system should accrue if any fees or penalties are
>>>>>>>> introduced in the middle of the loan term.
>>>>>>>>
>>>>>>>> Anyone with experience in upfront interest loan products with
>>>>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>>>>> on the same.
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> Regards,
>>>>>>>> Bharath
>>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>>
>>>>>>>>> Hi all,
>>>>>>>>>
>>>>>>>>> Hope this email finds you well. We are planning to implement
>>>>>>>>> upfront interest collection for the loans for some of our business use
>>>>>>>>> cases. With respect to the following 3 accounting configurations, how to
>>>>>>>>> post the journal entries ?
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>    1. Cash Based
>>>>>>>>>    2. Accrual (Up front)
>>>>>>>>>    3. Accrual (Periodic)
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Can we directly post the entry to income from interest GL Account?
>>>>>>>>> Or do we need to have some kind of liability GL account where upfront
>>>>>>>>> collected interest will be posted on this account initially and then moved
>>>>>>>>> to income from the interest account?
>>>>>>>>>
>>>>>>>>> And how the Periodic accrual entries should be posted (As periodic
>>>>>>>>> accrual entries will be accrued and posted per instalment)?
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> Thanks,
>>>>>>>>>
>>>>>>>>> Nazeer
>>>>>>>>>
>>>>>>>>> SSA, CrediLinq
>>>>>>>>>
>>>>>>>>> https://www.credilinq.ai
>>>>>>>>>
>>>>>>>>>
>>>>>>>>> --
> Sent from Gmail Mobile
>


-- 
*Ed Cable*
President/CEO, Mifos Initiative
edcable@mifos.org | Skype: edcable | Mobile: +1.484.477.8649

*Collectively Creating a World of 3 Billion Maries | *http://mifos.org
<http://facebook.com/mifos>  <http://www.twitter.com/mifos>

Re: Loans - Upfront Interest Collection

[James Dailey <ja...@gmail.com>]

Hi Nazeer - I’m trying to wrap my head around how you are defining income
and what limitations you are finding.  Glad to see the discussion.

Are you planning on making this a contribution to the Fineract code?  If
so, I’d like a lot more details, and some design thinking that’s reflected
in the tickets.

Generally, and this goes to comments already made, my feeling is:

The first strategy should be to use configurations  of products and
accounting. If that really fails, then a design analysis should be done to
understand why?  Is the product concept new?  Is there a compelling reason
to include it in a global banking application?  Is it legal and normal in
most jurisdictions?  In other words, does it help the project become
better?

Then, there are two options at least:
A) create a new configuration concept and propose the code change.  Note,
this should be designed to fit a class of issues not just one product in
one institution.  As a rule, it should not break existing features.
Regression Tests may need to be added to ensure that’s the case.

B) make use of a plug in or Java class replacement concept- I believe that
mechanism is under utilized so might need more explanation or development.
I’m not sure that would work but worth exploring if it saves time.

Thanks
James


On Thu, Jun 8, 2023 at 10:48 PM Nazeer Hussain Shaik <
nazeerhussain.shaik@gmail.com> wrote:

> That depends on your loan disclaimer. If you are saying I am collecting
> 18% interest (for example) you can't collect the charge instead of
> interest. Your income from interest will always be zero which will become
> an issue.
> With respect to accounting (To Bharath) I will get back in the evening
> (Day time IST busy).
>
> Thanks,
> Nazeer
>
> On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io> wrote:
>
>> Hello Nazeer,
>>
>> I concur with Bharath, the existing features should meet your
>> requirements. Since the interest portion is collected at disbursement, you
>> could have the interest collected as a disbursement fee with the interest
>> rate set at 0%.
>>
>> Using your example:
>>
>>    - Principal is 10k
>>    - Interest(disbursement fee) is 10% = 1k
>>    - At disbursement, 10k gets disbursed and 1k collected as
>>    interest(fee) immediately
>>    - Customer gets 9k but pays the full 10k over the loan term
>>
>> Using the above method, cash accounting should work just fine since the
>> interest(fee) has already been paid.
>>
>> These are my thoughts, please correct me if I misunderstood your
>> requirement. Share your documentation to help with testing. I can help with
>> that(testing).
>>
>> Thanks,
>> Ruhiu
>>
>> On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:
>>
>>> Hi Nazeer,
>>>
>>> Thanks for clarifications on the implementation, could you please help
>>> us with implementation notes on configuration and validations on the
>>> implemented changes?
>>> It will be useful for the interested members to test and it also helps
>>> in documenting the same.
>>>
>>> Coming back to the accounting entry discussion
>>>
>>> Since we are collecting the full interest upfront and only principal
>>> over the rest of the installments,
>>> For cash based Accounting
>>> - It does not feel correct to have a liability account approach as cash
>>> based Accounting principal is to effect the income account directly.
>>>
>>> For periodic accrual Accounting
>>> - Since full interest is collected upfront and no interest collected in
>>> remaining installments, it doesn't feel right to accrue interest
>>> installment wise, especially when the interest is already collected first.
>>>
>>> For upfront accrual Accounting
>>> - the current functionality of accruing whole interest should work fine,
>>> only question is to have the accrual date as of disbursement date or first
>>> installment date.
>>>
>>> I am not an expert on accounting but this what I feel based on my
>>> understanding so far.
>>>
>>>
>>> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
>>> nazeerhussain.shaik@gmail.com> wrote:
>>>
>>>> Hi Bharath,
>>>>
>>>> I hope this email finds you well. Sorry I have already completed the
>>>> implementation. Please find my comments below.
>>>>
>>>> Disbursement amount 10,000$
>>>> upfront Interest 1,000$
>>>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting
>>>> the upfront interest 1000 $ the loan balance will be 10,000 $
>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>      - Nazeer :Yes
>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>     - Nazeer: As we are collecting the interest, 1000$ should be marked
>>>> as complete interest collected
>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>> 10,000$)
>>>>    - Nazeer repayment schedule will be generated on 10,000$
>>>> 3. What will be the Principal and Interest split?
>>>>   - Nazeer: There won't be any interest component on Repayment Schedule
>>>> as we already collected interest (For now we are marking as all
>>>> installments interest paid)
>>>>
>>>> Typically, Upfront interest collection will be used for bullet loans
>>>> (Single Instalments). But our implementation will work even for term loans
>>>> ( Repayment Schedule count > 0)
>>>>
>>>> Thanks
>>>> Nazeer
>>>> SSA, Credilinq
>>>> https://www.credilinq.ai
>>>>
>>>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org> wrote:
>>>>
>>>>> Hi Nazeer,
>>>>>
>>>>> Thank you for creating the JIRA ticket and initiating the discussion.
>>>>>
>>>>>  "The problem is the upfront interest amount can't be posted directory
>>>>> to GL Account as I am not sure marking future installments interest paid is
>>>>> a good idea (at least with periodic accruals)."
>>>>>
>>>>> With respect to the above comment, it all depends on how we are
>>>>> handling the upfront interest that is being collected
>>>>>
>>>>> For example:
>>>>>
>>>>> Disbursement amount 10,000$
>>>>> upfront Interest 1,000$
>>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>>> 10,000$)
>>>>> 3. What will be the Principal and Interest split?
>>>>>
>>>>> I think we will have to first discuss and agree upon the loan cycle,
>>>>> schedule behavior and other scenarios use cases and based on that we can
>>>>> get clarity on accounting entries.
>>>>> I am happy to discuss further on this and help on documenting the
>>>>> feature and available next week at any time for the same. let me know if we
>>>>> can have one discussion next week.
>>>>>
>>>>>
>>>>>
>>>>> Regards,
>>>>> Bharath
>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>> <http://www.twitter.com/mifos>
>>>>>
>>>>>
>>>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>
>>>>>> Hi Bharath,
>>>>>>
>>>>>> Thank you. I will create a Jira ticket so that community members can
>>>>>> update the requirements there.
>>>>>>
>>>>>> 1. Cash-based
>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>> Account
>>>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>>>> on adding interest paid transaction(s) before installment due. I assume
>>>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>>>> recalculation config so far.
>>>>>>
>>>>>> 2. Accrual (Upfront)
>>>>>> For this type
>>>>>> We need to have a receivable account credited first and then would be
>>>>>> moved to the Income GL account when the payment comes in
>>>>>> Nazeer -> Same as above
>>>>>>
>>>>>> 3. Accrual (periodic)
>>>>>> Since on the business side, the Income amount is being collected
>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>> installment or at a periodic cut-off.
>>>>>> but the system should accrue if any fees or penalties are introduced
>>>>>> in the middle of the loan term.
>>>>>> Nazeer -> Same as above
>>>>>>
>>>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org>
>>>>>> wrote:
>>>>>>
>>>>>>> Hi Nazeer,
>>>>>>>
>>>>>>> Good to hear from you and happy to see this feature being worked on.
>>>>>>>  Has a Fineract JIRA been created yet for the same? it will be
>>>>>>> helpful if you could share the JIRA ticket with the flushed-out functional
>>>>>>> and implementation details.
>>>>>>> Curious to know more about what type of product configurations this
>>>>>>> would be allowed and not allowed. as it would become more complex with
>>>>>>> daily interest calculations and recalculations enabled.
>>>>>>>
>>>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>>>
>>>>>>> 1. Cash-based
>>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>>> Account
>>>>>>>
>>>>>>> 2. Accrual (Upfront)
>>>>>>> For this type
>>>>>>> We need to have a receivable account credited first and then would
>>>>>>> be moved to the Income GL account when the payment comes in
>>>>>>>
>>>>>>> 3. Accrual (periodic)
>>>>>>> Since on the business side, the Income amount is being collected
>>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>>> installment or at a periodic cut-off.
>>>>>>> but the system should accrue if any fees or penalties are introduced
>>>>>>> in the middle of the loan term.
>>>>>>>
>>>>>>> Anyone with experience in upfront interest loan products with
>>>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>>>> on the same.
>>>>>>>
>>>>>>>
>>>>>>>
>>>>>>> Regards,
>>>>>>> Bharath
>>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>>> <http://www.twitter.com/mifos>
>>>>>>>
>>>>>>>
>>>>>>>
>>>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>>
>>>>>>>> Hi all,
>>>>>>>>
>>>>>>>> Hope this email finds you well. We are planning to implement
>>>>>>>> upfront interest collection for the loans for some of our business use
>>>>>>>> cases. With respect to the following 3 accounting configurations, how to
>>>>>>>> post the journal entries ?
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>>    1. Cash Based
>>>>>>>>    2. Accrual (Up front)
>>>>>>>>    3. Accrual (Periodic)
>>>>>>>>
>>>>>>>>
>>>>>>>> Can we directly post the entry to income from interest GL Account?
>>>>>>>> Or do we need to have some kind of liability GL account where upfront
>>>>>>>> collected interest will be posted on this account initially and then moved
>>>>>>>> to income from the interest account?
>>>>>>>>
>>>>>>>> And how the Periodic accrual entries should be posted (As periodic
>>>>>>>> accrual entries will be accrued and posted per instalment)?
>>>>>>>>
>>>>>>>>
>>>>>>>> Thanks,
>>>>>>>>
>>>>>>>> Nazeer
>>>>>>>>
>>>>>>>> SSA, CrediLinq
>>>>>>>>
>>>>>>>> https://www.credilinq.ai
>>>>>>>>
>>>>>>>>
>>>>>>>> --
Sent from Gmail Mobile

Re: Loans - Upfront Interest Collection

[Nazeer Hussain Shaik <na...@gmail.com>]

That depends on your loan disclaimer. If you are saying I am collecting 18%
interest (for example) you can't collect the charge instead of interest.
Your income from interest will always be zero which will become an issue.
With respect to accounting (To Bharath) I will get back in the evening (Day
time IST busy).

Thanks,
Nazeer

On Fri, Jun 9, 2023 at 11:11 AM John Gathogo <jo...@fiter.io> wrote:

> Hello Nazeer,
>
> I concur with Bharath, the existing features should meet your
> requirements. Since the interest portion is collected at disbursement, you
> could have the interest collected as a disbursement fee with the interest
> rate set at 0%.
>
> Using your example:
>
>    - Principal is 10k
>    - Interest(disbursement fee) is 10% = 1k
>    - At disbursement, 10k gets disbursed and 1k collected as
>    interest(fee) immediately
>    - Customer gets 9k but pays the full 10k over the loan term
>
> Using the above method, cash accounting should work just fine since the
> interest(fee) has already been paid.
>
> These are my thoughts, please correct me if I misunderstood your
> requirement. Share your documentation to help with testing. I can help with
> that(testing).
>
> Thanks,
> Ruhiu
>
> On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:
>
>> Hi Nazeer,
>>
>> Thanks for clarifications on the implementation, could you please help us
>> with implementation notes on configuration and validations on the
>> implemented changes?
>> It will be useful for the interested members to test and it also helps in
>> documenting the same.
>>
>> Coming back to the accounting entry discussion
>>
>> Since we are collecting the full interest upfront and only principal over
>> the rest of the installments,
>> For cash based Accounting
>> - It does not feel correct to have a liability account approach as cash
>> based Accounting principal is to effect the income account directly.
>>
>> For periodic accrual Accounting
>> - Since full interest is collected upfront and no interest collected in
>> remaining installments, it doesn't feel right to accrue interest
>> installment wise, especially when the interest is already collected first.
>>
>> For upfront accrual Accounting
>> - the current functionality of accruing whole interest should work fine,
>> only question is to have the accrual date as of disbursement date or first
>> installment date.
>>
>> I am not an expert on accounting but this what I feel based on my
>> understanding so far.
>>
>>
>> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
>> nazeerhussain.shaik@gmail.com> wrote:
>>
>>> Hi Bharath,
>>>
>>> I hope this email finds you well. Sorry I have already completed the
>>> implementation. Please find my comments below.
>>>
>>> Disbursement amount 10,000$
>>> upfront Interest 1,000$
>>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting
>>> the upfront interest 1000 $ the loan balance will be 10,000 $
>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>      - Nazeer :Yes
>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>     - Nazeer: As we are collecting the interest, 1000$ should be marked
>>> as complete interest collected
>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>> 10,000$)
>>>    - Nazeer repayment schedule will be generated on 10,000$
>>> 3. What will be the Principal and Interest split?
>>>   - Nazeer: There won't be any interest component on Repayment Schedule
>>> as we already collected interest (For now we are marking as all
>>> installments interest paid)
>>>
>>> Typically, Upfront interest collection will be used for bullet loans
>>> (Single Instalments). But our implementation will work even for term loans
>>> ( Repayment Schedule count > 0)
>>>
>>> Thanks
>>> Nazeer
>>> SSA, Credilinq
>>> https://www.credilinq.ai
>>>
>>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org> wrote:
>>>
>>>> Hi Nazeer,
>>>>
>>>> Thank you for creating the JIRA ticket and initiating the discussion.
>>>>
>>>>  "The problem is the upfront interest amount can't be posted directory
>>>> to GL Account as I am not sure marking future installments interest paid is
>>>> a good idea (at least with periodic accruals)."
>>>>
>>>> With respect to the above comment, it all depends on how we are
>>>> handling the upfront interest that is being collected
>>>>
>>>> For example:
>>>>
>>>> Disbursement amount 10,000$
>>>> upfront Interest 1,000$
>>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>>> date? - that 1000$ collection would get allocated to principal or interest?
>>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>>> 10,000$)
>>>> 3. What will be the Principal and Interest split?
>>>>
>>>> I think we will have to first discuss and agree upon the loan cycle,
>>>> schedule behavior and other scenarios use cases and based on that we can
>>>> get clarity on accounting entries.
>>>> I am happy to discuss further on this and help on documenting the
>>>> feature and available next week at any time for the same. let me know if we
>>>> can have one discussion next week.
>>>>
>>>>
>>>>
>>>> Regards,
>>>> Bharath
>>>> Lead Implementation Analyst | Mifos Initiative
>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>> http://mifos.org  <http://facebook.com/mifos>
>>>> <http://www.twitter.com/mifos>
>>>>
>>>>
>>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>
>>>>> Hi Bharath,
>>>>>
>>>>> Thank you. I will create a Jira ticket so that community members can
>>>>> update the requirements there.
>>>>>
>>>>> 1. Cash-based
>>>>> For this, we can directly post the entry to income from interest GL
>>>>> Account
>>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>>> posted directory to GL Account as I am not sure marking future installments
>>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>>> on adding interest paid transaction(s) before installment due. I assume
>>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>>> recalculation config so far.
>>>>>
>>>>> 2. Accrual (Upfront)
>>>>> For this type
>>>>> We need to have a receivable account credited first and then would be
>>>>> moved to the Income GL account when the payment comes in
>>>>> Nazeer -> Same as above
>>>>>
>>>>> 3. Accrual (periodic)
>>>>> Since on the business side, the Income amount is being collected
>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>> installment or at a periodic cut-off.
>>>>> but the system should accrue if any fees or penalties are introduced
>>>>> in the middle of the loan term.
>>>>> Nazeer -> Same as above
>>>>>
>>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org>
>>>>> wrote:
>>>>>
>>>>>> Hi Nazeer,
>>>>>>
>>>>>> Good to hear from you and happy to see this feature being worked on.
>>>>>>  Has a Fineract JIRA been created yet for the same? it will be
>>>>>> helpful if you could share the JIRA ticket with the flushed-out functional
>>>>>> and implementation details.
>>>>>> Curious to know more about what type of product configurations this
>>>>>> would be allowed and not allowed. as it would become more complex with
>>>>>> daily interest calculations and recalculations enabled.
>>>>>>
>>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>>
>>>>>> 1. Cash-based
>>>>>> For this, we can directly post the entry to income from interest GL
>>>>>> Account
>>>>>>
>>>>>> 2. Accrual (Upfront)
>>>>>> For this type
>>>>>> We need to have a receivable account credited first and then would be
>>>>>> moved to the Income GL account when the payment comes in
>>>>>>
>>>>>> 3. Accrual (periodic)
>>>>>> Since on the business side, the Income amount is being collected
>>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>>> installment or at a periodic cut-off.
>>>>>> but the system should accrue if any fees or penalties are introduced
>>>>>> in the middle of the loan term.
>>>>>>
>>>>>> Anyone with experience in upfront interest loan products with
>>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>>> on the same.
>>>>>>
>>>>>>
>>>>>>
>>>>>> Regards,
>>>>>> Bharath
>>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>>> <http://www.twitter.com/mifos>
>>>>>>
>>>>>>
>>>>>>
>>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>>
>>>>>>> Hi all,
>>>>>>>
>>>>>>> Hope this email finds you well. We are planning to implement upfront
>>>>>>> interest collection for the loans for some of our business use cases. With
>>>>>>> respect to the following 3 accounting configurations, how to post the
>>>>>>> journal entries ?
>>>>>>>
>>>>>>>
>>>>>>>
>>>>>>>    1. Cash Based
>>>>>>>    2. Accrual (Up front)
>>>>>>>    3. Accrual (Periodic)
>>>>>>>
>>>>>>>
>>>>>>> Can we directly post the entry to income from interest GL Account?
>>>>>>> Or do we need to have some kind of liability GL account where upfront
>>>>>>> collected interest will be posted on this account initially and then moved
>>>>>>> to income from the interest account?
>>>>>>>
>>>>>>> And how the Periodic accrual entries should be posted (As periodic
>>>>>>> accrual entries will be accrued and posted per instalment)?
>>>>>>>
>>>>>>>
>>>>>>> Thanks,
>>>>>>>
>>>>>>> Nazeer
>>>>>>>
>>>>>>> SSA, CrediLinq
>>>>>>>
>>>>>>> https://www.credilinq.ai
>>>>>>>
>>>>>>>
>>>>>>>

Re: Loans - Upfront Interest Collection

[John Gathogo <jo...@fiter.io>]

Hello Nazeer,

I concur with Bharath, the existing features should meet your requirements.
Since the interest portion is collected at disbursement, you could have the
interest collected as a disbursement fee with the interest rate set at 0%.

Using your example:

   - Principal is 10k
   - Interest(disbursement fee) is 10% = 1k
   - At disbursement, 10k gets disbursed and 1k collected as interest(fee)
   immediately
   - Customer gets 9k but pays the full 10k over the loan term

Using the above method, cash accounting should work just fine since the
interest(fee) has already been paid.

These are my thoughts, please correct me if I misunderstood your
requirement. Share your documentation to help with testing. I can help with
that(testing).

Thanks,
Ruhiu

On Fri, Jun 9, 2023 at 7:23 AM Bharath Gowda <bg...@mifos.org> wrote:

> Hi Nazeer,
>
> Thanks for clarifications on the implementation, could you please help us
> with implementation notes on configuration and validations on the
> implemented changes?
> It will be useful for the interested members to test and it also helps in
> documenting the same.
>
> Coming back to the accounting entry discussion
>
> Since we are collecting the full interest upfront and only principal over
> the rest of the installments,
> For cash based Accounting
> - It does not feel correct to have a liability account approach as cash
> based Accounting principal is to effect the income account directly.
>
> For periodic accrual Accounting
> - Since full interest is collected upfront and no interest collected in
> remaining installments, it doesn't feel right to accrue interest
> installment wise, especially when the interest is already collected first.
>
> For upfront accrual Accounting
> - the current functionality of accruing whole interest should work fine,
> only question is to have the accrual date as of disbursement date or first
> installment date.
>
> I am not an expert on accounting but this what I feel based on my
> understanding so far.
>
>
> On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
> nazeerhussain.shaik@gmail.com> wrote:
>
>> Hi Bharath,
>>
>> I hope this email finds you well. Sorry I have already completed the
>> implementation. Please find my comments below.
>>
>> Disbursement amount 10,000$
>> upfront Interest 1,000$
>>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting the
>> upfront interest 1000 $ the loan balance will be 10,000 $
>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>      - Nazeer :Yes
>> 1. I assume 1,000$  would be marked collected as of the disbursement
>> date? - that 1000$ collection would get allocated to principal or interest?
>>     - Nazeer: As we are collecting the interest, 1000$ should be marked
>> as complete interest collected
>> 2. On what amount of repayment schedule will be generated? (9000 or
>> 10,000$)
>>    - Nazeer repayment schedule will be generated on 10,000$
>> 3. What will be the Principal and Interest split?
>>   - Nazeer: There won't be any interest component on Repayment Schedule
>> as we already collected interest (For now we are marking as all
>> installments interest paid)
>>
>> Typically, Upfront interest collection will be used for bullet loans
>> (Single Instalments). But our implementation will work even for term loans
>> ( Repayment Schedule count > 0)
>>
>> Thanks
>> Nazeer
>> SSA, Credilinq
>> https://www.credilinq.ai
>>
>> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org> wrote:
>>
>>> Hi Nazeer,
>>>
>>> Thank you for creating the JIRA ticket and initiating the discussion.
>>>
>>>  "The problem is the upfront interest amount can't be posted directory
>>> to GL Account as I am not sure marking future installments interest paid is
>>> a good idea (at least with periodic accruals)."
>>>
>>> With respect to the above comment, it all depends on how we are
>>> handling the upfront interest that is being collected
>>>
>>> For example:
>>>
>>> Disbursement amount 10,000$
>>> upfront Interest 1,000$
>>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>>> 1. I assume 1,000$  would be marked collected as of the disbursement
>>> date? - that 1000$ collection would get allocated to principal or interest?
>>> 2. On what amount of repayment schedule will be generated? (9000 or
>>> 10,000$)
>>> 3. What will be the Principal and Interest split?
>>>
>>> I think we will have to first discuss and agree upon the loan cycle,
>>> schedule behavior and other scenarios use cases and based on that we can
>>> get clarity on accounting entries.
>>> I am happy to discuss further on this and help on documenting the
>>> feature and available next week at any time for the same. let me know if we
>>> can have one discussion next week.
>>>
>>>
>>>
>>> Regards,
>>> Bharath
>>> Lead Implementation Analyst | Mifos Initiative
>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>> http://mifos.org  <http://facebook.com/mifos>
>>> <http://www.twitter.com/mifos>
>>>
>>>
>>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>>> nazeerhussain.shaik@gmail.com> wrote:
>>>
>>>> Hi Bharath,
>>>>
>>>> Thank you. I will create a Jira ticket so that community members can
>>>> update the requirements there.
>>>>
>>>> 1. Cash-based
>>>> For this, we can directly post the entry to income from interest GL
>>>> Account
>>>> Nazeer -> The problem is the upfront interest amount can't be
>>>> posted directory to GL Account as I am not sure marking future installments
>>>> interest paid is a good idea (at least with periodic accruals). So I am
>>>> thinking of keeping the upfront interest on Liability GL account and keep
>>>> on adding interest paid transaction(s) before installment due. I assume
>>>> this works for 3 accounting scenarios. I haven't thought about interest
>>>> recalculation config so far.
>>>>
>>>> 2. Accrual (Upfront)
>>>> For this type
>>>> We need to have a receivable account credited first and then would be
>>>> moved to the Income GL account when the payment comes in
>>>> Nazeer -> Same as above
>>>>
>>>> 3. Accrual (periodic)
>>>> Since on the business side, the Income amount is being collected
>>>> upfront I do not think it is correct to have interest accruals at the
>>>> installment or at a periodic cut-off.
>>>> but the system should accrue if any fees or penalties are introduced in
>>>> the middle of the loan term.
>>>> Nazeer -> Same as above
>>>>
>>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org> wrote:
>>>>
>>>>> Hi Nazeer,
>>>>>
>>>>> Good to hear from you and happy to see this feature being worked on.
>>>>>  Has a Fineract JIRA been created yet for the same? it will be helpful
>>>>> if you could share the JIRA ticket with the flushed-out functional and
>>>>> implementation details.
>>>>> Curious to know more about what type of product configurations this
>>>>> would be allowed and not allowed. as it would become more complex with
>>>>> daily interest calculations and recalculations enabled.
>>>>>
>>>>> Here are my 2 cents on the accounting entry for the same
>>>>>
>>>>> 1. Cash-based
>>>>> For this, we can directly post the entry to income from interest GL
>>>>> Account
>>>>>
>>>>> 2. Accrual (Upfront)
>>>>> For this type
>>>>> We need to have a receivable account credited first and then would be
>>>>> moved to the Income GL account when the payment comes in
>>>>>
>>>>> 3. Accrual (periodic)
>>>>> Since on the business side, the Income amount is being collected
>>>>> upfront I do not think it is correct to have interest accruals at the
>>>>> installment or at a periodic cut-off.
>>>>> but the system should accrue if any fees or penalties are introduced
>>>>> in the middle of the loan term.
>>>>>
>>>>> Anyone with experience in upfront interest loan products with
>>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>>> on the same.
>>>>>
>>>>>
>>>>>
>>>>> Regards,
>>>>> Bharath
>>>>> Lead Implementation Analyst | Mifos Initiative
>>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>>> http://mifos.org  <http://facebook.com/mifos>
>>>>> <http://www.twitter.com/mifos>
>>>>>
>>>>>
>>>>>
>>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>>
>>>>>> Hi all,
>>>>>>
>>>>>> Hope this email finds you well. We are planning to implement upfront
>>>>>> interest collection for the loans for some of our business use cases. With
>>>>>> respect to the following 3 accounting configurations, how to post the
>>>>>> journal entries ?
>>>>>>
>>>>>>
>>>>>>
>>>>>>    1. Cash Based
>>>>>>    2. Accrual (Up front)
>>>>>>    3. Accrual (Periodic)
>>>>>>
>>>>>>
>>>>>> Can we directly post the entry to income from interest GL Account? Or
>>>>>> do we need to have some kind of liability GL account where upfront
>>>>>> collected interest will be posted on this account initially and then moved
>>>>>> to income from the interest account?
>>>>>>
>>>>>> And how the Periodic accrual entries should be posted (As periodic
>>>>>> accrual entries will be accrued and posted per instalment)?
>>>>>>
>>>>>>
>>>>>> Thanks,
>>>>>>
>>>>>> Nazeer
>>>>>>
>>>>>> SSA, CrediLinq
>>>>>>
>>>>>> https://www.credilinq.ai
>>>>>>
>>>>>>
>>>>>>

Re: Loans - Upfront Interest Collection

[Bharath Gowda <bg...@mifos.org>]

Hi Nazeer,

Thanks for clarifications on the implementation, could you please help us
with implementation notes on configuration and validations on the
implemented changes?
It will be useful for the interested members to test and it also helps in
documenting the same.

Coming back to the accounting entry discussion

Since we are collecting the full interest upfront and only principal over
the rest of the installments,
For cash based Accounting
- It does not feel correct to have a liability account approach as cash
based Accounting principal is to effect the income account directly.

For periodic accrual Accounting
- Since full interest is collected upfront and no interest collected in
remaining installments, it doesn't feel right to accrue interest
installment wise, especially when the interest is already collected first.

For upfront accrual Accounting
- the current functionality of accruing whole interest should work fine,
only question is to have the accrual date as of disbursement date or first
installment date.

I am not an expert on accounting but this what I feel based on my
understanding so far.


On Fri, Jun 9, 2023, 12:48 AM Nazeer Hussain Shaik <
nazeerhussain.shaik@gmail.com> wrote:

> Hi Bharath,
>
> I hope this email finds you well. Sorry I have already completed the
> implementation. Please find my comments below.
>
> Disbursement amount 10,000$
> upfront Interest 1,000$
>   - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting the
> upfront interest 1000 $ the loan balance will be 10,000 $
> So if we actually disburse only 9,000 $ and collect back 10,000 $
>      - Nazeer :Yes
> 1. I assume 1,000$  would be marked collected as of the disbursement date?
> - that 1000$ collection would get allocated to principal or interest?
>     - Nazeer: As we are collecting the interest, 1000$ should be marked as
> complete interest collected
> 2. On what amount of repayment schedule will be generated? (9000 or
> 10,000$)
>    - Nazeer repayment schedule will be generated on 10,000$
> 3. What will be the Principal and Interest split?
>   - Nazeer: There won't be any interest component on Repayment Schedule as
> we already collected interest (For now we are marking as all installments
> interest paid)
>
> Typically, Upfront interest collection will be used for bullet loans
> (Single Instalments). But our implementation will work even for term loans
> ( Repayment Schedule count > 0)
>
> Thanks
> Nazeer
> SSA, Credilinq
> https://www.credilinq.ai
>
> On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org> wrote:
>
>> Hi Nazeer,
>>
>> Thank you for creating the JIRA ticket and initiating the discussion.
>>
>>  "The problem is the upfront interest amount can't be posted directory to
>> GL Account as I am not sure marking future installments interest paid is a
>> good idea (at least with periodic accruals)."
>>
>> With respect to the above comment, it all depends on how we are
>> handling the upfront interest that is being collected
>>
>> For example:
>>
>> Disbursement amount 10,000$
>> upfront Interest 1,000$
>> So if we actually disburse only 9,000 $ and collect back 10,000 $
>> 1. I assume 1,000$  would be marked collected as of the disbursement
>> date? - that 1000$ collection would get allocated to principal or interest?
>> 2. On what amount of repayment schedule will be generated? (9000 or
>> 10,000$)
>> 3. What will be the Principal and Interest split?
>>
>> I think we will have to first discuss and agree upon the loan cycle,
>> schedule behavior and other scenarios use cases and based on that we can
>> get clarity on accounting entries.
>> I am happy to discuss further on this and help on documenting the feature
>> and available next week at any time for the same. let me know if we can
>> have one discussion next week.
>>
>>
>>
>> Regards,
>> Bharath
>> Lead Implementation Analyst | Mifos Initiative
>> Skype: live:cbharath4| Mobile: +91.7019635592
>> http://mifos.org  <http://facebook.com/mifos>
>> <http://www.twitter.com/mifos>
>>
>>
>> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
>> nazeerhussain.shaik@gmail.com> wrote:
>>
>>> Hi Bharath,
>>>
>>> Thank you. I will create a Jira ticket so that community members can
>>> update the requirements there.
>>>
>>> 1. Cash-based
>>> For this, we can directly post the entry to income from interest GL
>>> Account
>>> Nazeer -> The problem is the upfront interest amount can't be
>>> posted directory to GL Account as I am not sure marking future installments
>>> interest paid is a good idea (at least with periodic accruals). So I am
>>> thinking of keeping the upfront interest on Liability GL account and keep
>>> on adding interest paid transaction(s) before installment due. I assume
>>> this works for 3 accounting scenarios. I haven't thought about interest
>>> recalculation config so far.
>>>
>>> 2. Accrual (Upfront)
>>> For this type
>>> We need to have a receivable account credited first and then would be
>>> moved to the Income GL account when the payment comes in
>>> Nazeer -> Same as above
>>>
>>> 3. Accrual (periodic)
>>> Since on the business side, the Income amount is being collected upfront
>>> I do not think it is correct to have interest accruals at the installment
>>> or at a periodic cut-off.
>>> but the system should accrue if any fees or penalties are introduced in
>>> the middle of the loan term.
>>> Nazeer -> Same as above
>>>
>>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org> wrote:
>>>
>>>> Hi Nazeer,
>>>>
>>>> Good to hear from you and happy to see this feature being worked on.
>>>>  Has a Fineract JIRA been created yet for the same? it will be helpful
>>>> if you could share the JIRA ticket with the flushed-out functional and
>>>> implementation details.
>>>> Curious to know more about what type of product configurations this
>>>> would be allowed and not allowed. as it would become more complex with
>>>> daily interest calculations and recalculations enabled.
>>>>
>>>> Here are my 2 cents on the accounting entry for the same
>>>>
>>>> 1. Cash-based
>>>> For this, we can directly post the entry to income from interest GL
>>>> Account
>>>>
>>>> 2. Accrual (Upfront)
>>>> For this type
>>>> We need to have a receivable account credited first and then would be
>>>> moved to the Income GL account when the payment comes in
>>>>
>>>> 3. Accrual (periodic)
>>>> Since on the business side, the Income amount is being collected
>>>> upfront I do not think it is correct to have interest accruals at the
>>>> installment or at a periodic cut-off.
>>>> but the system should accrue if any fees or penalties are introduced in
>>>> the middle of the loan term.
>>>>
>>>> Anyone with experience in upfront interest loan products with
>>>> accrual-based accounting, feel free to correct me and share your thoughts
>>>> on the same.
>>>>
>>>>
>>>>
>>>> Regards,
>>>> Bharath
>>>> Lead Implementation Analyst | Mifos Initiative
>>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>>> http://mifos.org  <http://facebook.com/mifos>
>>>> <http://www.twitter.com/mifos>
>>>>
>>>>
>>>>
>>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>>> nazeerhussain.shaik@gmail.com> wrote:
>>>>
>>>>> Hi all,
>>>>>
>>>>> Hope this email finds you well. We are planning to implement upfront
>>>>> interest collection for the loans for some of our business use cases. With
>>>>> respect to the following 3 accounting configurations, how to post the
>>>>> journal entries ?
>>>>>
>>>>>
>>>>>
>>>>>    1. Cash Based
>>>>>    2. Accrual (Up front)
>>>>>    3. Accrual (Periodic)
>>>>>
>>>>>
>>>>> Can we directly post the entry to income from interest GL Account? Or
>>>>> do we need to have some kind of liability GL account where upfront
>>>>> collected interest will be posted on this account initially and then moved
>>>>> to income from the interest account?
>>>>>
>>>>> And how the Periodic accrual entries should be posted (As periodic
>>>>> accrual entries will be accrued and posted per instalment)?
>>>>>
>>>>>
>>>>> Thanks,
>>>>>
>>>>> Nazeer
>>>>>
>>>>> SSA, CrediLinq
>>>>>
>>>>> https://www.credilinq.ai
>>>>>
>>>>>
>>>>>

Re: Loans - Upfront Interest Collection

[Nazeer Hussain Shaik <na...@gmail.com>]

Hi Bharath,

I hope this email finds you well. Sorry I have already completed the
implementation. Please find my comments below.

Disbursement amount 10,000$
upfront Interest 1,000$
  - Nazeer: Total loan balance -> 10,000 $ + 1000 $. After collecting the
upfront interest 1000 $ the loan balance will be 10,000 $
So if we actually disburse only 9,000 $ and collect back 10,000 $
     - Nazeer :Yes
1. I assume 1,000$  would be marked collected as of the disbursement date?
- that 1000$ collection would get allocated to principal or interest?
    - Nazeer: As we are collecting the interest, 1000$ should be marked as
complete interest collected
2. On what amount of repayment schedule will be generated? (9000 or 10,000$)
   - Nazeer repayment schedule will be generated on 10,000$
3. What will be the Principal and Interest split?
  - Nazeer: There won't be any interest component on Repayment Schedule as
we already collected interest (For now we are marking as all installments
interest paid)

Typically, Upfront interest collection will be used for bullet loans
(Single Instalments). But our implementation will work even for term loans
( Repayment Schedule count > 0)

Thanks
Nazeer
SSA, Credilinq
https://www.credilinq.ai

On Thu, Jun 8, 2023 at 10:07 PM Bharath Gowda <bg...@mifos.org> wrote:

> Hi Nazeer,
>
> Thank you for creating the JIRA ticket and initiating the discussion.
>
>  "The problem is the upfront interest amount can't be posted directory to
> GL Account as I am not sure marking future installments interest paid is a
> good idea (at least with periodic accruals)."
>
> With respect to the above comment, it all depends on how we are
> handling the upfront interest that is being collected
>
> For example:
>
> Disbursement amount 10,000$
> upfront Interest 1,000$
> So if we actually disburse only 9,000 $ and collect back 10,000 $
> 1. I assume 1,000$  would be marked collected as of the disbursement date?
> - that 1000$ collection would get allocated to principal or interest?
> 2. On what amount of repayment schedule will be generated? (9000 or
> 10,000$)
> 3. What will be the Principal and Interest split?
>
> I think we will have to first discuss and agree upon the loan cycle,
> schedule behavior and other scenarios use cases and based on that we can
> get clarity on accounting entries.
> I am happy to discuss further on this and help on documenting the feature
> and available next week at any time for the same. let me know if we can
> have one discussion next week.
>
>
>
> Regards,
> Bharath
> Lead Implementation Analyst | Mifos Initiative
> Skype: live:cbharath4| Mobile: +91.7019635592
> http://mifos.org  <http://facebook.com/mifos>
> <http://www.twitter.com/mifos>
>
>
> On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
> nazeerhussain.shaik@gmail.com> wrote:
>
>> Hi Bharath,
>>
>> Thank you. I will create a Jira ticket so that community members can
>> update the requirements there.
>>
>> 1. Cash-based
>> For this, we can directly post the entry to income from interest GL
>> Account
>> Nazeer -> The problem is the upfront interest amount can't be
>> posted directory to GL Account as I am not sure marking future installments
>> interest paid is a good idea (at least with periodic accruals). So I am
>> thinking of keeping the upfront interest on Liability GL account and keep
>> on adding interest paid transaction(s) before installment due. I assume
>> this works for 3 accounting scenarios. I haven't thought about interest
>> recalculation config so far.
>>
>> 2. Accrual (Upfront)
>> For this type
>> We need to have a receivable account credited first and then would be
>> moved to the Income GL account when the payment comes in
>> Nazeer -> Same as above
>>
>> 3. Accrual (periodic)
>> Since on the business side, the Income amount is being collected upfront
>> I do not think it is correct to have interest accruals at the installment
>> or at a periodic cut-off.
>> but the system should accrue if any fees or penalties are introduced in
>> the middle of the loan term.
>> Nazeer -> Same as above
>>
>> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org> wrote:
>>
>>> Hi Nazeer,
>>>
>>> Good to hear from you and happy to see this feature being worked on.
>>>  Has a Fineract JIRA been created yet for the same? it will be helpful
>>> if you could share the JIRA ticket with the flushed-out functional and
>>> implementation details.
>>> Curious to know more about what type of product configurations this
>>> would be allowed and not allowed. as it would become more complex with
>>> daily interest calculations and recalculations enabled.
>>>
>>> Here are my 2 cents on the accounting entry for the same
>>>
>>> 1. Cash-based
>>> For this, we can directly post the entry to income from interest GL
>>> Account
>>>
>>> 2. Accrual (Upfront)
>>> For this type
>>> We need to have a receivable account credited first and then would be
>>> moved to the Income GL account when the payment comes in
>>>
>>> 3. Accrual (periodic)
>>> Since on the business side, the Income amount is being collected upfront
>>> I do not think it is correct to have interest accruals at the installment
>>> or at a periodic cut-off.
>>> but the system should accrue if any fees or penalties are introduced in
>>> the middle of the loan term.
>>>
>>> Anyone with experience in upfront interest loan products with
>>> accrual-based accounting, feel free to correct me and share your thoughts
>>> on the same.
>>>
>>>
>>>
>>> Regards,
>>> Bharath
>>> Lead Implementation Analyst | Mifos Initiative
>>> Skype: live:cbharath4| Mobile: +91.7019635592
>>> http://mifos.org  <http://facebook.com/mifos>
>>> <http://www.twitter.com/mifos>
>>>
>>>
>>>
>>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>>> nazeerhussain.shaik@gmail.com> wrote:
>>>
>>>> Hi all,
>>>>
>>>> Hope this email finds you well. We are planning to implement upfront
>>>> interest collection for the loans for some of our business use cases. With
>>>> respect to the following 3 accounting configurations, how to post the
>>>> journal entries ?
>>>>
>>>>
>>>>
>>>>    1. Cash Based
>>>>    2. Accrual (Up front)
>>>>    3. Accrual (Periodic)
>>>>
>>>>
>>>> Can we directly post the entry to income from interest GL Account? Or
>>>> do we need to have some kind of liability GL account where upfront
>>>> collected interest will be posted on this account initially and then moved
>>>> to income from the interest account?
>>>>
>>>> And how the Periodic accrual entries should be posted (As periodic
>>>> accrual entries will be accrued and posted per instalment)?
>>>>
>>>>
>>>> Thanks,
>>>>
>>>> Nazeer
>>>>
>>>> SSA, CrediLinq
>>>>
>>>> https://www.credilinq.ai
>>>>
>>>>
>>>>

Re: Loans - Upfront Interest Collection

[Bharath Gowda <bg...@mifos.org>]

Hi Nazeer,

Thank you for creating the JIRA ticket and initiating the discussion.

 "The problem is the upfront interest amount can't be posted directory to
GL Account as I am not sure marking future installments interest paid is a
good idea (at least with periodic accruals)."

With respect to the above comment, it all depends on how we are
handling the upfront interest that is being collected

For example:

Disbursement amount 10,000$
upfront Interest 1,000$
So if we actually disburse only 9,000 $ and collect back 10,000 $
1. I assume 1,000$  would be marked collected as of the disbursement date?
- that 1000$ collection would get allocated to principal or interest?
2. On what amount of repayment schedule will be generated? (9000 or 10,000$)
3. What will be the Principal and Interest split?

I think we will have to first discuss and agree upon the loan cycle,
schedule behavior and other scenarios use cases and based on that we can
get clarity on accounting entries.
I am happy to discuss further on this and help on documenting the feature
and available next week at any time for the same. let me know if we can
have one discussion next week.



Regards,
Bharath
Lead Implementation Analyst | Mifos Initiative
Skype: live:cbharath4| Mobile: +91.7019635592
http://mifos.org  <http://facebook.com/mifos>
<http://www.twitter.com/mifos>


On Thu, Jun 1, 2023 at 3:48 PM Nazeer Hussain Shaik <
nazeerhussain.shaik@gmail.com> wrote:

> Hi Bharath,
>
> Thank you. I will create a Jira ticket so that community members can
> update the requirements there.
>
> 1. Cash-based
> For this, we can directly post the entry to income from interest GL Account
> Nazeer -> The problem is the upfront interest amount can't be
> posted directory to GL Account as I am not sure marking future installments
> interest paid is a good idea (at least with periodic accruals). So I am
> thinking of keeping the upfront interest on Liability GL account and keep
> on adding interest paid transaction(s) before installment due. I assume
> this works for 3 accounting scenarios. I haven't thought about interest
> recalculation config so far.
>
> 2. Accrual (Upfront)
> For this type
> We need to have a receivable account credited first and then would be
> moved to the Income GL account when the payment comes in
> Nazeer -> Same as above
>
> 3. Accrual (periodic)
> Since on the business side, the Income amount is being collected upfront I
> do not think it is correct to have interest accruals at the installment or
> at a periodic cut-off.
> but the system should accrue if any fees or penalties are introduced in
> the middle of the loan term.
> Nazeer -> Same as above
>
> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org> wrote:
>
>> Hi Nazeer,
>>
>> Good to hear from you and happy to see this feature being worked on.
>>  Has a Fineract JIRA been created yet for the same? it will be helpful if
>> you could share the JIRA ticket with the flushed-out functional and
>> implementation details.
>> Curious to know more about what type of product configurations this would
>> be allowed and not allowed. as it would become more complex with daily
>> interest calculations and recalculations enabled.
>>
>> Here are my 2 cents on the accounting entry for the same
>>
>> 1. Cash-based
>> For this, we can directly post the entry to income from interest GL
>> Account
>>
>> 2. Accrual (Upfront)
>> For this type
>> We need to have a receivable account credited first and then would be
>> moved to the Income GL account when the payment comes in
>>
>> 3. Accrual (periodic)
>> Since on the business side, the Income amount is being collected upfront
>> I do not think it is correct to have interest accruals at the installment
>> or at a periodic cut-off.
>> but the system should accrue if any fees or penalties are introduced in
>> the middle of the loan term.
>>
>> Anyone with experience in upfront interest loan products with
>> accrual-based accounting, feel free to correct me and share your thoughts
>> on the same.
>>
>>
>>
>> Regards,
>> Bharath
>> Lead Implementation Analyst | Mifos Initiative
>> Skype: live:cbharath4| Mobile: +91.7019635592
>> http://mifos.org  <http://facebook.com/mifos>
>> <http://www.twitter.com/mifos>
>>
>>
>>
>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>> nazeerhussain.shaik@gmail.com> wrote:
>>
>>> Hi all,
>>>
>>> Hope this email finds you well. We are planning to implement upfront
>>> interest collection for the loans for some of our business use cases. With
>>> respect to the following 3 accounting configurations, how to post the
>>> journal entries ?
>>>
>>>
>>>
>>>    1. Cash Based
>>>    2. Accrual (Up front)
>>>    3. Accrual (Periodic)
>>>
>>>
>>> Can we directly post the entry to income from interest GL Account? Or do
>>> we need to have some kind of liability GL account where upfront collected
>>> interest will be posted on this account initially and then moved to income
>>> from the interest account?
>>>
>>> And how the Periodic accrual entries should be posted (As periodic
>>> accrual entries will be accrued and posted per instalment)?
>>>
>>>
>>> Thanks,
>>>
>>> Nazeer
>>>
>>> SSA, CrediLinq
>>>
>>> https://www.credilinq.ai
>>>
>>>
>>>

Re: Loans - Upfront Interest Collection

[Nazeer Hussain Shaik <na...@gmail.com>]

Hi,

I have created the jira ticket for the same
https://issues.apache.org/jira/browse/FINERACT-1935

Thanks,

Nazeer

SSA, CrediLinq

https://www.credilinq.ai


On Thu, Jun 1, 2023 at 3:47 PM Nazeer Hussain Shaik <
nazeerhussain.shaik@gmail.com> wrote:

> Hi Bharath,
>
> Thank you. I will create a Jira ticket so that community members can
> update the requirements there.
>
> 1. Cash-based
> For this, we can directly post the entry to income from interest GL Account
> Nazeer -> The problem is the upfront interest amount can't be
> posted directory to GL Account as I am not sure marking future installments
> interest paid is a good idea (at least with periodic accruals). So I am
> thinking of keeping the upfront interest on Liability GL account and keep
> on adding interest paid transaction(s) before installment due. I assume
> this works for 3 accounting scenarios. I haven't thought about interest
> recalculation config so far.
>
> 2. Accrual (Upfront)
> For this type
> We need to have a receivable account credited first and then would be
> moved to the Income GL account when the payment comes in
> Nazeer -> Same as above
>
> 3. Accrual (periodic)
> Since on the business side, the Income amount is being collected upfront I
> do not think it is correct to have interest accruals at the installment or
> at a periodic cut-off.
> but the system should accrue if any fees or penalties are introduced in
> the middle of the loan term.
> Nazeer -> Same as above
>
> On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org> wrote:
>
>> Hi Nazeer,
>>
>> Good to hear from you and happy to see this feature being worked on.
>>  Has a Fineract JIRA been created yet for the same? it will be helpful if
>> you could share the JIRA ticket with the flushed-out functional and
>> implementation details.
>> Curious to know more about what type of product configurations this would
>> be allowed and not allowed. as it would become more complex with daily
>> interest calculations and recalculations enabled.
>>
>> Here are my 2 cents on the accounting entry for the same
>>
>> 1. Cash-based
>> For this, we can directly post the entry to income from interest GL
>> Account
>>
>> 2. Accrual (Upfront)
>> For this type
>> We need to have a receivable account credited first and then would be
>> moved to the Income GL account when the payment comes in
>>
>> 3. Accrual (periodic)
>> Since on the business side, the Income amount is being collected upfront
>> I do not think it is correct to have interest accruals at the installment
>> or at a periodic cut-off.
>> but the system should accrue if any fees or penalties are introduced in
>> the middle of the loan term.
>>
>> Anyone with experience in upfront interest loan products with
>> accrual-based accounting, feel free to correct me and share your thoughts
>> on the same.
>>
>>
>>
>> Regards,
>> Bharath
>> Lead Implementation Analyst | Mifos Initiative
>> Skype: live:cbharath4| Mobile: +91.7019635592
>> http://mifos.org  <http://facebook.com/mifos>
>> <http://www.twitter.com/mifos>
>>
>>
>>
>> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
>> nazeerhussain.shaik@gmail.com> wrote:
>>
>>> Hi all,
>>>
>>> Hope this email finds you well. We are planning to implement upfront
>>> interest collection for the loans for some of our business use cases. With
>>> respect to the following 3 accounting configurations, how to post the
>>> journal entries ?
>>>
>>>
>>>
>>>    1. Cash Based
>>>    2. Accrual (Up front)
>>>    3. Accrual (Periodic)
>>>
>>>
>>> Can we directly post the entry to income from interest GL Account? Or do
>>> we need to have some kind of liability GL account where upfront collected
>>> interest will be posted on this account initially and then moved to income
>>> from the interest account?
>>>
>>> And how the Periodic accrual entries should be posted (As periodic
>>> accrual entries will be accrued and posted per instalment)?
>>>
>>>
>>> Thanks,
>>>
>>> Nazeer
>>>
>>> SSA, CrediLinq
>>>
>>> https://www.credilinq.ai
>>>
>>>
>>>

Re: Loans - Upfront Interest Collection

[Nazeer Hussain Shaik <na...@gmail.com>]

Hi Bharath,

Thank you. I will create a Jira ticket so that community members can update
the requirements there.

1. Cash-based
For this, we can directly post the entry to income from interest GL Account
Nazeer -> The problem is the upfront interest amount can't be
posted directory to GL Account as I am not sure marking future installments
interest paid is a good idea (at least with periodic accruals). So I am
thinking of keeping the upfront interest on Liability GL account and keep
on adding interest paid transaction(s) before installment due. I assume
this works for 3 accounting scenarios. I haven't thought about interest
recalculation config so far.

2. Accrual (Upfront)
For this type
We need to have a receivable account credited first and then would be moved
to the Income GL account when the payment comes in
Nazeer -> Same as above

3. Accrual (periodic)
Since on the business side, the Income amount is being collected upfront I
do not think it is correct to have interest accruals at the installment or
at a periodic cut-off.
but the system should accrue if any fees or penalties are introduced in the
middle of the loan term.
Nazeer -> Same as above

On Thu, Jun 1, 2023 at 12:22 PM Bharath Gowda <bg...@mifos.org> wrote:

> Hi Nazeer,
>
> Good to hear from you and happy to see this feature being worked on.
>  Has a Fineract JIRA been created yet for the same? it will be helpful if
> you could share the JIRA ticket with the flushed-out functional and
> implementation details.
> Curious to know more about what type of product configurations this would
> be allowed and not allowed. as it would become more complex with daily
> interest calculations and recalculations enabled.
>
> Here are my 2 cents on the accounting entry for the same
>
> 1. Cash-based
> For this, we can directly post the entry to income from interest GL Account
>
> 2. Accrual (Upfront)
> For this type
> We need to have a receivable account credited first and then would be
> moved to the Income GL account when the payment comes in
>
> 3. Accrual (periodic)
> Since on the business side, the Income amount is being collected upfront I
> do not think it is correct to have interest accruals at the installment or
> at a periodic cut-off.
> but the system should accrue if any fees or penalties are introduced in
> the middle of the loan term.
>
> Anyone with experience in upfront interest loan products with
> accrual-based accounting, feel free to correct me and share your thoughts
> on the same.
>
>
>
> Regards,
> Bharath
> Lead Implementation Analyst | Mifos Initiative
> Skype: live:cbharath4| Mobile: +91.7019635592
> http://mifos.org  <http://facebook.com/mifos>
> <http://www.twitter.com/mifos>
>
>
>
> On Thu, Jun 1, 2023 at 12:03 AM Nazeer Hussain Shaik <
> nazeerhussain.shaik@gmail.com> wrote:
>
>> Hi all,
>>
>> Hope this email finds you well. We are planning to implement upfront
>> interest collection for the loans for some of our business use cases. With
>> respect to the following 3 accounting configurations, how to post the
>> journal entries ?
>>
>>
>>
>>    1. Cash Based
>>    2. Accrual (Up front)
>>    3. Accrual (Periodic)
>>
>>
>> Can we directly post the entry to income from interest GL Account? Or do
>> we need to have some kind of liability GL account where upfront collected
>> interest will be posted on this account initially and then moved to income
>> from the interest account?
>>
>> And how the Periodic accrual entries should be posted (As periodic
>> accrual entries will be accrued and posted per instalment)?
>>
>>
>> Thanks,
>>
>> Nazeer
>>
>> SSA, CrediLinq
>>
>> https://www.credilinq.ai
>>
>>
>>