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Loan Management in Odoo

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Odoo Functional

Managing Financial Loans in Odoo

The Loans menu in Odoo is a powerful tool designed to help businesses efficiently manage financial loans taken by the company. These loans are recorded as liabilities and tracked systematically to ensure proper financial management, timely repayments, and accurate accounting.

Key Features of Odoo Loan Management

In Odoo Accounting module, the “LOANS” menu is typically used to manage Bank loan-related transactions, including:

Recording Bank Loans
Odoo bank loan management
Allows you to track borrowed amounts as financial liabilities. Inside our Loan Settings we can configure the long-term liability account (above 1 year) and short-term liability account (within 1 year) along with the Expenses account for Laon interests to be accounted. We can create a specific journal too for the financial loans.
Loan Amortization
odoo loan amortization
System Automatically generates Amortization schedule, interest calculations, and periodic payments. We have our principal amount, interest, payments and outstanding balance at specific point of time. Theoretically we can compare our long-term v/s short-term liability from the amortization schedule itself.
Automating Entries
Generates accounting journal entries for loan repayments, including principal and interest portions. All the entries, including repayment entry, classification and reclassification journal entry will be on a draft stage and gets posted on the assigned loan repayment date.
Integration with Bank Statements
Loan transactions can be matched with bank reconciliations. Odoo’s bank integration allows you to automatically match loan repayments with bank statements, ensuring accurate financial tracking.
Reconciliation Model
You can create new reconciliation model in Odoo to reconcile automatically. Create rule to suggest counter part entry, with label contains loan specifically by selecting short-term liability account created in our chart of accounts.
Loans View and Reports
Multi views are available like list view, Kanban view, pivot view and graphical view. You can generate dynamic loan reports which provides an overview of outstanding loans, repayment status, and financial impact. You can create customized dashboards for your loan status visibility using Odoo Dashboard module.

Using the Loans Menu in Odoo Accounting

Odoo_laon management
The Loans menu in Odoo is used to manage financial loans taken by the company (liabilities). Below is an overview of how this feature efficiently supports business.

COA Required

Take a look of the Accounts required for the Loan

  • Loan Payable (Long Term) :- Non-current Liability.
  • Laon Payable (Short Term) :- Current Liability.
  • Interest Expense :- Expense

What are the Journal entries gets created?

Odoo loan management debt, credit

Each line in the amortization schedule odoo creates three journal entries:

  • Payment Entry (Same Day) :- To denote what is due that month (Principle + interest).
  • Reclassification Entry (Same Day) :- To reclassify the short term and long term obligation.
  • Reclassification Reversal Entry (Next Day) :- To reset the reclassification and await the next months journal entry.

Two Reclassification Journals

Multiple compounding Methods

The Compounding Method determines how interest is calculated over time. The different methods available in the dropdown follow standard financial conventions for computing interest.

Compounding Methods in Odoo

  1. 30A/360 (US Method)
    Assumes 30 days per month and 360 days per year.
    ◦ Used in the United States for bond and loan calculations.
    ◦ Standardized method where each month has 30 days, regardless of actual days.
  2. 30U/360 (Uniform Method)
    ◦ Similar to 30A/360, but it follows a uniform approach:
    ▪ If the loan starts on the 31st, it is considered the 30th.
    ▪ February is counted with actual days but adjusted to 30 for calculations.
    ◦ Used in Germany and some European countries.
  3. 30E/360 (Eurobond Basis)
    ◦ Assumes 30 days per month and 360 days per year (like 30A/360).
    ◦ Treats all months as 30 days, including February.
    ◦ Commonly used in Europe, corporate bonds, and financial agreements.
  4. 30E/360 ISDA (International Swaps and Derivatives Association)
    ◦ A variation of 30E/360, where February is always treated as having 30 days.
    ◦ Used in ISDA agreements and derivative contracts.
  5. A/360 (Actual/360)
    ◦ Uses actual days in a month but assumes 360 days per year.
    ◦ Common in money market instruments and short-term loans.
    ◦ Results in slightly higher interest than A/365.
  6. A/365F (Actual/365 Fixed)
    ◦ Uses actual days in a month and 365 days per year.
    ◦ Standard for consumer loans and some European financial institutions.
  7. A/A ISDA (Actual/Actual ISDA)
    ◦ Uses actual days in a month and actual days in a year (365 or 366 in leap years).
    ◦ Commonly used in bonds and financial derivatives.
  8. A/A AFB (Actual/Actual AFB)
    ◦ A variation of A/A ISDA, following Association for Financial Markets in Europe (AFB) rules.
    ◦ Used in French and European government bonds.

Which Method Should You Choose?

  • For standard business loans: Use 30U/360 or 30A/360.
  • For financial bonds and derivatives: Use A/A ISDA or 30E/360 ISDA.
  • For short-term money markets: Use A/360.
  • For consumer and personal loans: Use A/365F.

Key Benefits of using the “LOANS” in Odoo

Automated Loan Management – Reduces manual tracking effort.
✔ Accurate Financial Statements – Loans are correctly classified
✔ Interest Calculation & Repayment Tracking – Ensures timely payments.
✔ Integration with Accounting & Bank Statements – Improves financial visibility.

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Conclusion

Odoo loan management system simplifies financial planning by allowing users to select appropriate compounding methods for accurate interest calculations and its automation.

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