Before you open a Time Deposit for a client, you need to set the required parameters for the organisation at System/Configurations/Time Deposits. These settings will indicate the preferred minimum and maximum amounts, interest rates and periods for the time deposits.
Note: 1. You can open time-deposits for any type of client, whether individual, group or business. However if it is a group, the time deposit is open by the whole group and not by each member. Time deposits are always deposited for monthly periods and this period can be specified up to a maximum of 999 months.
2. Interest can be calculated at the maturity date over the whole period or can be calculated every month. If it is calculated at maturity you have the possibility to capitalize interest. If interest is calculated monthly, then it can be withdrawn monthly but if it is calculated at maturity, then it can only be withdrawn at maturity. Withdrawal of interest can be paid in cash to the client or transferred to the client’s savings account.
3. If Loan Performer accounting has been activated, you can only enter time-deposits on or after the start of the financial year.
4. The client can open a time deposit as a cash transaction, by depositing a cheque, as a transfer from his savings account or as a bank transfer. In case of a cheque or bank transfer you should have defined bank accounts under menu Configuration/Banks. In case of a savings transfer, the client should have opened a savings account (see menu Clients). Beware that if Loan Performer accounting has been activated, you can only enter time-deposits on or after the start of the financial year.
5. Time deposits are always for monthly periods, from 1 up to 999 months. Interest can be calculated at maturity date over the whole period or can be calculated every month. In the first case you have the possibility to capitalize interest. This means that interest is added to the capital every end of month and the interest for the next month will be calculated over capital and past interest. If interest is calculated monthly, you can choose to withdraw it monthly. If it is calculated at maturity, it shall be withdrawn at maturity. Withdrawal on interest can be in cash by the client or as a transfer to the client’s savings account.
6. Interest should be added regularly to the accounts. You need to run the interest module for time-deposits. The interest is calculated depending on the date that you enter. You then have a possibility to indicate whether certain accounts should or should not get interest. You need to make a printout before the interest can be added to the accounts. If you have forgotten to enter a time-deposit before you run the interest module, you can enter the missing TD and run the interest module again for the same date. It will now just show the interest for the missing TD.
7. In case a client wants to withdraw a time-deposit before maturity, the user can charge a penalty. If you indicate so, a receipt will be printed. Withdrawal of time-deposits can be in cash, as a transfer to the client’s savings account or as a transfer to his/her bank account.
8. All the settings can be modified during the course of the time-deposit. It is also possible to delete a time-deposit, in which case any cheques and added interest related to the time deposit will be deleted as well.
How to open a Time Deposit
To open a time deposit you go to Savings/Time Deposits/Open Time Deposit and a screen will appear looking as follows:
Client Code: Enter the code for the client for whom you want to open a time deposit, e.g., "KA/I/000001" or click on the Choose command button to select it from the list that is displayed.
Click on the Next button to continue. The Open Time Deposit dialog will be displayed:
Account No: This field will automatically be populated with the account number of the selected client, e.g., "KA000001".
Name:This field will automatically be populated with the name of the selected client, e.g., "Dalton James".
Product: Select the time deposit product from the drop down list. Note that the currency for the selected time deposit will automatically be displayed.
Reference No: This field will automatically be populated with the selected client's reference number, e.g., "1256666".
Deposit Date: This is the date when the time deposit amount is deposited with the organisation, e.g., "30/08/2019".
Value Date: Enter here the value date. The value date is the date that the system should start counting the time deposit period.
Amount: Enter the amount that you wish to deposit, e.g., "1,000,000".
Voucher: The voucher number text box will automatically be updated with
Call Deposit: Tick this option to make the time deposit a call deposit. A call deposit is one where the bank that allow the depositor instant access to their accounts. Withdrawals and deposits can be made at any time.
Interest calculated at maturity: Choose the mode of interest calculation either at maturity, monthly, quarterly, semi annually or annually. You can only use one option at a time and the system will compute interest either in days or months depending on the configuration set at Time Deposits Settings.
Interest paid at calculation (Cash or cheque): When this option is selected interest is calculated on a given date and cash or a cheque is handed over to the client.
Interest to be remitted to savings a/c: When this option is selected interest is calculated on a given date and transferred to the client's savings accounts.
Interest can be withdrawn at maturity: This option gives the client the option to withdraw the interest once it has reached maturity.
Interest to be remitted to savings a/c at maturity: This option allows the system to transfer the interest to the client's savings account once it has reached maturity.
Note that all the above calculations can have, Interest period specified in days, Interest calculation in days but LPF will automatically consider the number of days in a month, quarter semi annual or annual periods.
Period in Months: Enter here the number of months that the time deposit will take in months. This will be necessary when the system is computing the interest.
Interest Capitalized: Tick this option to activate interest capitalization. Capitalization is the addition of unpaid interest to the principal balance of your time deposit when payments are postponed unpaid interest is capitalized.
Maturity Date: This is the date the time deposit will end it is determined by the period in months from the time deposit date/time.
Maturity Value: This is the date the time deposit will end it is determined by the period in months from the time deposit date/time.
Withholding tax (%): Enter the percentage of the interest payment that will be withheld by the organization and sent directly to the government as partial payment of income tax.
Withholding tax: The amount of withholding tax charged above will automatically be populated in this field.
VAT: The VAT textbox will automatically be updated with the VAT charged according to the current VAT rates set atSupport Files/VAT rates.
Select the mode of interest calculation from the available radio options. For further information on these option refer to Interest Calculation Methods.
Note Also you have to indicate what should be done with the capital at maturity. The possibilities are to automatically renew the time deposit for another term, to remit the balance to the savings account or it can be withdrawn by the client in cash.
Click on the Save button to complete. Loan Performer saves the deposit and generates a Time Deposit Certificate:
Note: For Step 6 if it is a cheque or bank transfer you should have defined bank accounts under Configuration/Banks. In case of a savings transfer, the client should have opened a savings account.
If you have activated the accounting part of Loan Performer by entering the start of the financial year at Configuration/Accounts, Loan Performer will book the opening of a Time- Deposit as follows (this is automatic):
Cash/Suspense Account Cheque/Bank or Savings Debit
-/-Time-Deposits Credit
When you calculate interest on time deposits, nothing is booked.
Afterwards, when the client withdraws the time-deposit and the interest:
Time-Deposits Debit
Interest Due on Time Deposits (a Liability) Debit
Cash/Bank or Savings Account Credit
If the cashier does not pay the full amount – because of unavailable coins for instance – the difference is posted to the account Cash Differences Time-Deposits.
Note that Loan Performer supports deposit interest computation in two different methods as shown below:
I a). When Interest period specified in days is not checked then interest will be computed in months. In this case LPF will compute interest as follows:
For a time deposit of 1,000,000, for four months, at 25% interest rate opened on 01/01/2017
1,000,000*25%/12*4
1000,000 *25/100 = 250,000/12= 20,833.33 per month
20,833.33 *4 = 83,333.33
See the image below:
I b). And when the Depends on months elapsed is also checked then interest will still be computed in months but only for completed months:
For example above if the time deposit is withdrawn on the 27/02/ 2017, the system considers interest for only one months i.e January. The 27 days of February come zero.
For a time deposit of 1,000,000, for four months, at 25% interest rate opened on 01/01/2017 and withdrawn on the 27th February 2017 the system considers interest for only one month as follows:
1,000,000 x 25%/12 x 1
1000,000 x 25/100 = 250,000/12= 20,833.33
20,833.33 x 1 =20,833.33
II). When Interest period specified in days is checked then interest will be computed in days. In this case LPF will compute interest as follows:
A time deposit of 1,000,000 is made for 120 days at 25% opened on 01/01/2017
TD Interest is calculated as (1,000,000 x 120/365 x 25%) = 82.191.
1000000 x 120/365 = 328,767
328767 x 25/100 = 82,191.
See image below:
If the option "Interest period in days" is ticked, then you will be required to enter the number of days under the menu Savings/Time Deposits/Open Time Deposits and not the number of months. The label will change from "Period in months" to "Period in days".
Please note that if you are setting different parameters for different products, you have to save the settings (press the "Save" for each product.
