PURPOSE

The pay-out process lets a leasing company settle a contract before its scheduled end. The system calculates a pay-out figure covering the outstanding balance, interest and early termination fees. The figure is frozen only until the next installment, because after that the schedule moves on and a new figure is needed. The company can give the figure to the customer as a pay-out letter. In the standard flow the customer pays, the system recognizes the payment, and the final invoice is created automatically. The pay-out card can also work the opposite way: the customer is invoiced first, using the Create Invoice action, and pays against that invoice.

SETUP

Leasing Setup

1. Payout Invoicing Rule – sets when the automatic final invoice is created.
   • Invoice when paid: the final invoice is created once the customer's payment covers the pay-out figure, whether or not the quote was confirmed.
   • Invoice when paid and payout confirmed: the final invoice is created automatically only if the quote is confirmed and sent to the customer (status "Quoted to Customer"). While installments remain, a payment alone does not trigger invoicing.
   • The rule does not affect the Create Invoice action.
2. Bank Clearance Period in Days – the automatic final invoice is not created until this many days have passed since the customer's last payment.
3. Buy-Out No. Series – gives each pay-out quote its number.

Pay-Out Fee Codes

Pay-out fees are defined once as Pay-Out Fee Codes (search for "Pay-Out Fee Codes") and then selected on Financial Products. Each code has:

• Currency Code – the currency of the amounts. Only codes in the same currency as the Financial Product can be selected on it.
• Description – shown on the quote when the code is used as an additional fee.
• Administration Cost – a fixed fee. Used only when the code is the main fee code.
• Pay-Out Fee Charge – the fee amount, excluding VAT.
• Early Termination Fee Charge is Fixed – used only when the code is the main fee code. If selected, the Pay-Out Fee Charge is charged in full. If not selected, it is reduced in proportion to the remaining installments divided by the total installments of the contract.
• Discount % – used only by the Discounted Cash Flows method. It is subtracted from the contract interest rate to get the discount rate for the remaining installments.

Financial Product

1. Early Payout Figure Method – decides how the pay-out figure is built and how long the quote stays frozen. The three methods are compared in the next section.
2. Early Termination Fee Code (main fee) – always required, because the quote cannot be calculated without it. Under NetRec+Int+ETF and ETF it defines the main fee. Under Discounted Cash Flows only its Discount % is used.
3. Additional Pay-Out Fee Codes – open the field to list extra fee codes. Under NetRec+Int+ETF and ETF each code adds its own fee line to every quote. Under Discounted Cash Flows they are ignored.
4. Cust. Debit Tolerance on Closure – the amount by which a payment may fall short of the pay-out figure and still count as paid in full.
5. Trigger Contract Closure – whether a settled contract is closed automatically or manually.

HOW THE PAY-OUT FIGURE IS CALCULATED – METHODS COMPARED

Discounted Cash Flows (DCF) – formulas

The figure is the sum of the unpaid installments (amounts including VAT), each discounted back to today:

• Discount rate % = contract interest rate % − Discount % of the main fee code
• Periodic rate = discount rate % ÷ installments per year ÷ 100
• Pay-out figure = Σ installment n ÷ (1 + periodic rate)^n, where n = 1 for the first unpaid installment, 2 for the second, and so on
• A final residual value or balloon that is due in the same period as the last installment is discounted with the same n as that installment.
• The first unpaid installment is always discounted one full period, whatever the calculated-as-of date is within the current period.
• Because the Discount % is subtracted from the rate, a higher Discount % gives a lower discount rate and a higher pay-out figure. The Discount % acts as a margin charged to the customer for settling early, instead of a fee.
• The VAT contained in the figure is shown separately, extracted using the principal VAT group. Where the contract is funded, the funder's pay-out figure is calculated the same way using the funding rate.

Example 1 – six unpaid installments

Contract rate 12%, monthly installments (12 per year), main fee code Discount % = 2, six unpaid installments of 1,000.00 incl. VAT.

• Discount rate = 12% − 2% = 10%; periodic rate = 10 ÷ 12 ÷ 100 = 0.0083333
• Installment 1: 1,000.00 ÷ 1.0083333^1 = 991.74
• Installment 2: 1,000.00 ÷ 1.0083333^2 = 983.54
• Installment 3: 1,000.00 ÷ 1.0083333^3 = 975.41
• Installment 4: 1,000.00 ÷ 1.0083333^4 = 967.35
• Installment 5: 1,000.00 ÷ 1.0083333^5 = 959.36
• Installment 6: 1,000.00 ÷ 1.0083333^6 = 951.43
• Pay-out figure = 5,828.82 (with Discount % = 0 the figure would be 5,795.48, so the 2% margin adds 33.34)

Example 2 – four unpaid installments and a residual value

Same rates. Four unpaid installments of 1,200.00 incl. VAT and a residual value of 5,000.00 due with the last installment.

• Installments: 1,190.08 + 1,180.25 + 1,170.49 + 1,160.82 = 4,701.64
• Residual value: 5,000.00 ÷ 1.0083333^4 = 4,836.75
• Pay-out figure = 9,538.39

Example 3 – the same contract under the other methods (illustrative numbers)

Six of 24 installments remain. VAT 21%, no stamp tax. Outstanding principal 5,500.00 excl. VAT, accrued interest 40.00 excl. VAT. Main fee code: Administration Cost 50.00 and Pay-Out Fee Charge 400.00, not fixed. One additional fee code with Pay-Out Fee Charge 40.00.

• Main fee = 50.00 + 400.00 × 6 ÷ 24 = 150.00 excl. VAT = 181.50 incl. VAT
• Additional fee = 40.00 in full (never pro-rated, no administration cost) = 48.40 incl. VAT
• Outstanding principal = 5,500.00 × 1.21 = 6,655.00; accrued interest = 40.00 × 1.21 = 48.40
• NetRec+Int+ETF figure = 6,655.00 + 48.40 + 181.50 + 48.40 = 6,933.30
• ETF figure = 181.50 + 48.40 = 229.90
• DCF figure on the same product = discounted installments only. The main fee and additional fee above are not added.
• If no installments remain, no main fee is charged.

HOW TO USE

A. Prepare the quote (both flows)

1. Open the contract and choose Pay-Out Quote. The valid quote opens, or a new one is created.
2. Set Calculated as of Date and choose Calculate Pay-Out. The date must not be before today or after the next installment date, and the system adjusts it into that window. Review the outstanding balance, accrued interest, fees, any waived fee and the customer balance. The total to pay is the pay-out figure plus the customer balance.
3. Review the fees. The main fee shows on the quote, and each additional fee is a line that can be opened from the quote. Every recalculation refreshes the lines of the product's additional codes to the code's current amount. While the quote is New you can add a line with another fee code or change a line's amount manually. A manual line whose code is not one of the product's additional codes is kept as it is. A manual change to a configured line is overwritten by the next calculation.
4. To waive part of the main fee, select the person who approved the waiver and enter the Waived ETF Amount. The waived amount cannot exceed the main fee payable. Clearing the approver clears the waiver.
5. Choose Confirm. The status becomes "Quoted to Customer" and the figure is frozen until the Valid Until date shown on the quote. A quote that passes its Valid Until date becomes "Expired" automatically.
6. Re-Open returns the quote to New for changes, and Cancel expires it. Both need the Buy-Out Admin permission.
7. Choose Create Pay-Out Letter to produce the letter. For direct debit, enter the collection date and choose Create DD Collection.

B. Standard flow: the customer pays first

1. The customer pays the quoted amount, or any amount covering it within the tolerance.
2. The system recognizes the payment once the customer's credit covers the pay-out figure, using the latest valid quote. If the Payout Invoicing Rule requires confirmation and the quote is not "Quoted to Customer", nothing is invoiced.
3. The final invoice is created and posted when contract expiration runs, either the Run Contract Expiration action on the contract or the scheduled run over all contracts. The bank clearance period must have passed first.
4. The contract is marked as finally invoiced and can be closed.

C. Alternative flow: invoice the customer first

1. Complete A1–A5 so the quote is "Quoted to Customer" and still within its Valid Until date.
2. On the pay-out card, choose Create Invoice and confirm the question that shows the pay-out figure and contract number.
3. The system invoices the pay-out figure the same way as the automatic final invoice. The main fee plus all additional fees are posted as a separate invoice posting.
4. The customer pays the invoice. The contract is already marked as finally invoiced, so nothing is invoiced again.

Restrictions on Create Invoice

• Available only on the valid quote with status "Quoted to Customer".
• Refused if the quote's Valid Until date has passed. Calculate and confirm a new quote instead.
• Refused if the contract was already finally invoiced, or if the contract is not in "Contract" status.
• Does not change the contract status. Closing follows the usual process.