NetLoan - Accounting Decisions & Account Usage
Pre-Installation / Configuration Accounting Decisions
Prior to the installation and configuration of NetLoan, there are several key accounting and configuration decisions management should make with the assistance of the technical accounting team, including the following:
- Loan Landscape and Key Accounting Decisions
- NetLoan Go-Live Date
- Default Transaction Status
- What loan types to use to segregate your loan portfolio
- Default Calculated Variable (Schedule Calculation Type)
- Calculate Payment - will calculate the monthly payment based off a known annual percentage rate (APR) and initial loan balance
- Calculate Rate - will calculate the APR based off a known monthly payment amount and initial loan balance
- Default - will calculate the balloon payment based off a known APR, monthly payment, and loan balance
- Calculate Payment (Interest Only) - will calculate the monthly payment needed to pay only the interest portion on the loan, with the principle being paid in full at loan term.
- Defined Principal Repayments - will calculate the monthly payment based off a set reduction to principal (the amount input for initial monthly payment)
- Default Payment Day
- The default day the loan will have its payments posted within the month if no payment records are present and no payment day has been overridden on the loan record
- Default Billing Day
- The default day the loan will be invoiced each month
- Default Day Count Convention
- 30/360: Calculates the daily interest using a 360-day year and then multiplies that by 30 (standardized month)
- 30/365: Calculates the daily interest using a 365-day year and then multiplies that by 30 (standardized month)
- Actual/360: Calculates the daily interest using a 360-day year and then multiplies that by the actual number of days in each time period
- Actual/365: Calculates the daily interest using a 365-day year and then multiplies that by the actual number of days in each time period
- Actual/Actual: Calculates the daily interest using the actual number of days in the year and then multiplies that by the actual number of days in each time period
- Default Business Day Convention
- Affects which days loan payments post (and therefore affects interest calculations) when the expected payment day falls on a weekend or a holiday.
- Unadjusted - if the loan payment date is scheduled for a non-business day (weekend or holiday), the payment is still booked on that date
- Following - if the loan payment date is scheduled for a non-business day (weekend or holiday), the payment is booked on the next business day
- Mod-Following - if the loan payment date is scheduled for a non-business day (weekend or holiday), the payment is booked on the next business day. However, if the next business day is in the subsequent period, then the payment is booked (in full) on the last available business day of the current period.
- Preceeding - if the loan payment date is scheduled for a non-business day (weekend or holiday), the payment is booked on the previous business day
- Mod-Proceeding - if the loan payment date is scheduled for a non-business day (weekend or holiday), the payment is booked on the previous business day. However, if the previous business day is in the prior period, then the payment is booked (in full) on the next available business day of the current period.
- Affects which days loan payments post (and therefore affects interest calculations) when the expected payment day falls on a weekend or a holiday.
- Default Interest Capitalization Frequency
- The frequency unpaid interest is added to the principal balance of your loan.
- Never - unpaid interest is never added to the principal balance
- Period End - unpaid interest is added to the principal balance at period end
- Payment Date - unpaid interest is added to the principal balance on the date of payment
- Always - unpaid interest is added to the principal balance at period end and on the date of payment
- The frequency unpaid interest is added to the principal balance of your loan.
- Default Calculated Variable (Schedule Calculation Type)
- Chart of Accounts Decisions
- Note that the NetLoan will be set up to map each separate transaction types to an account in your chart of accounts
- The listing below should be reviewed to identify which accounts will be needed
- NOTE: Netgain recommends that the primary loan accounts listed below are set up as single-purpose accounts (i.e., for NetLoan system-generated loan transactions only). This allows for complete segregation of activities between loan and non-loan accounting transactions to improve reporting and reconciliations between NetLoan (as the subledger) and the general ledger.
NetLoan setup utilizes the following accounts:
| Account | Account Type | Description | Example |
| Loan Proceeds & Orig. Fees Clearing Account | Other Current Asset | Clearing account for origination fees that are incurred at or before the origination of the loan | 1321 |
| Gain/Loss on Loan Transactions Account | Other Expense | P&L account where loan adjustments are recorded against | 8041 |
| Go-Live Clearing Account | Other Current Asset | Clearing account to offset the beginning balances at the go-live date for loan administration | 1261 |
| Cap. Loan Orig. Fees Account - Current | Other Current Asset | Asset account where short-term portion of loan origination fees are recorded | 1330 |
| Cap. Loan Orig. Fees Amortization Exp. Account | Other Asset | Expense account where loan origination fees will be amortized over time | 1950 |
| Loan Discount/Premium Account | Contra asset/liability | Contra asset/liability account used to track the unamortized portion of a discount or premium on a loan | 6652 |
| Loan Discount/Premium Income/Expense Account | Income/Expense Account | Account where discount/premium of loan is recorded | 8500 |
| Loan Payment Payable Clearing Account | Other Current Liability | Typically a child of ST Loan Payable, where expected monthly payments are recorded and actual payments are cleared against | 2071 |
| Interest Expense Account | Expense | Primary Interest Expense account for the loan type | 1410 |
| Loan Liability Short Term Account | Other Current Liability | Short term payable account where principal amounts due within 12 months are reclassed on a monthly basis | 2070 |
| Loan Liability Long Term Account (Primary) | Long Term Liability | Primary Liabilty account where the debt principal amount is recorded. All transactions and payments are made against this account | 2700 |
| Loan Liability Long Term Contra Account | Long Term Liability | Contra account to record the monthly reclass (reversing entry) out of Long-Term Debt and into Short-Term Debt | 2705 |
| Accrued Interest Payable Account | Other Current Liability | Asset account where accrued interest payable of the loan is recorded | 2090 |
| Loan Payment Receivable Clearing Account | Other Current Asset | Clearing account for loan payments from borrowers | 1250 |
| Interest Income Account | Income | Primary Interest Income account for the loan type | 8010 |
| Note Receivable - Current Account | Other Current Asset | Short-term receivable account where the principal amount receivable within 12 months are reclassed on a monthly basis | 1320 |
| Note Receivable - Noncurrent Account | Other Asset | Primary Asset account where the debt principal amount is recorded. All transactions and receipts are made against this account | 1960 |
| Note Receivable - Noncurrent Reclass Contra Account | Other Asset | Contra account to record the monthly reclass (reversing entry) out of Long-Term Note Receivable and into Short-Term Note Receivable | 1965 |
| Accrued Interest Receivable Account | Other Current Asset | Asset account where accrued interest receivable of the loan is recorded | 1340 |
Updates to your chart of accounts to reflect the accounts above will be made via Setup > Accounting > Chart of Accounts