Accounts receivable

Aging report

A report that lists what each customer owes, grouped by how long the invoices have been unpaid: current, 1 to 30 days late, 31 to 60, and so on.

In short

It shows at a glance which customers are late and by how much.
The older an invoice gets, the less likely it is to be collected.
It is the starting point for collections work and for estimating bad debts.

An aging report, or accounts receivable aging, breaks down the receivables balance by customer and by the age of each unpaid invoice. The usual columns are current (not yet due), 1 to 30 days past due, 31 to 60, 61 to 90 and over 90 days. Some businesses age by invoice date rather than due date. It is worth checking which basis a report uses.

How it gets used

Collections: the report tells the credit team who to call first, usually the largest balances in the oldest columns.
Credit decisions: a customer with a growing 60-day balance may need to be put on hold before more goods are shipped.
Bad debt estimates: many businesses reserve a percentage of each aging bucket, higher for older ones, to estimate the allowance for doubtful accounts.
Audit: auditors use the aging to judge whether receivables on the balance sheet will really be collected.

Reading it well

Totals can hide problems. A report where 85% of the balance is current looks healthy, but if one customer accounts for most of the over-90 column, that single account may be the real risk. Unapplied cash and unissued credit notes also distort aging, making customers look later than they are.

An accounts payable aging works the same way, listing what the business owes its suppliers by age.

Worked example

Reading one aging

Customer	Current	1–30	31–60	61–90	90+
Northwind	$18,000	$4,200
Bluebay	$6,500		$7,800	$3,100	$9,400
Total	$24,500	$4,200	$7,800	$3,100	$9,400

Bluebay is where the risk sits: $20,300 overdue, nearly half of it more than 90 days. It is the first call of the week, and new orders may need to wait.