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 15^{th}, 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.
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