Understanding payment plan calculations

Dentrix Ascend uses industry-standard formulas for determining the amortization of a payment plan based on the specified number of payments, payment amount, annual percentage rate, and payment interval.

P = r(A) / 1-(1+r)-n
(where P is the payment amount, r is the periodic rate, A is the amount being financed, and n is the number of payment periods per year)

r = (1+i)1/n-1
(where r is the periodic rate, i is the annual percentage rate, and n is the number of payment periods per year)

Note: The number of payment periods per year for monthly payments is 12; for bi-weekly payments, 26; and for quarterly payments, 4.


Example

During checkout on January 15th, Sally says she would like to pay $50 toward her account balance of $220 today and the rest over time. She says she can pay $50 bi-weekly until it's paid off. You offer her a %2 annual percentage rate. She agrees to the terms. You take her $50 down payment, and then you set up a payment plan for the remaining balance of $170.

The following table illustrates how the financed amount will be amortized, showing how much of each payment goes toward principle, how much goes toward interest, and the running balance.

Note: The periodic rate (r) for bi-weekly payments in this example is 0.00076192. Each payment period's interest is the product of the periodic rate and the previous balance (r x Balance).

Due Date

Payment

Payment Amount

To Interest

To Principle

Balance

$220

1/15

Down Payment

$50

$0

$50

$170 (220 - 50)

2/15

#1

$50

$.13 (170 x 0.00076192)

$49.87 (50 - .13)

$120.13 (170 - 49.87)

3/15

#2

$50

$.09 (12.13 x 0.00076192)

$49.91 (50 - .09)

$70.22 (120.13 - 49.91)

4/15

#3

$50

$.05 (70.22 x 0.00076192)

$49.95 (50 - .05)

$20.27 (70.22 - 49.95)

5/15

#4

$20.27

$0

$20.27

$0 (20.27 - 20.27)

Total paid (includes interest):

$170.27

Notes:

  • Making a payment early does not change what is due for the corresponding period. For example, making payment #1 on 2/10 will not reduce the interest that has to be paid.

  • Making a balloon payment (such as, $100 for payment #1) will reduce the balance and cause the amortization schedule to be recalculated, resulting in less interest having to be paid over the life of the payment plan.

  • Payment plans do not account for late payments. The patient will not be penalized automatically, and the amortization schedule will remain unchanged. However, if a fee for a late payment has been agreed upon, you can adjust the patient's account balance accordingly; it just won't be figured into the payment plan.

  • Interest portions from a payment plan are posted to the patient's record as charge adjustments.