An aging report, also called an accounts receivable aging report, is a record of overdue invoices from a specific time period that is used to measure the financial health of the company and its customers.
Aging reports display overdue payments. Read more about how to issue a payment reminder to customers to help you get paid quick: 'How to write a reminder'.
Aging reports are used to determine which customers have an overdue balance, how long the balance has been overdue, and if this is a regular occurrence, to find a solution to ensure it doesn’t happen again.
How does accounts receivable aging work?
Accounts receivable are the amounts owed to a business by a customer who purchased something on credit.
Aging reports can be used as a tool to indicate if certain customers will become a credit risk to the business. If the customer regularly pays invoices late, then it may be beneficial to stop doing business with this customer altogether, or insisting that payment be made upfront rather than on credit.
Aging reports are generally run in 30 day segments and will show accounts receivable that are currently due, as well as ones that are overdue.
What goes on an accounts receivable aging report?
An official aging report will include your business name and details, and the title “Aging Report”. It will also include the following columns:
- Customers who have overdue balances
- Date ranges of the outstanding balances
- Total amount outstanding
For instance, the chart may look something like this:
The overdue amounts will be divided into separate columns based on how late the payments are. This is generally broken up into 30 day periods.
The advantages of using an accounts receivable aging report
The main benefit of using aging reports is to identify how much money is owed to the business and is past its due date. From there, management can make decisions based on certain customers payment patterns to ensure that you’re on top of your billing and collections.
Overdue payments will affect your company’s cash flow. If a customer is paying their balance late on a regular basis, your business can evaluate whether to sever ties with that customer altogether, or to reevaluate their payment terms.
Essentially, aging reports will help the management team understand why payments are late and come up with a plan to make sure this doesn’t happen in the future and affect the cash flow.
Aging reports and invoicing software
Invoicing software is a useful tool to keep a record of all transactions and keep an eye on your cash flow. All invoices and payments are saved to the cloud and can be accessed at any time, from any device.
With Debitoor, you can easily keep track of any overdue invoices directly from your account. You can apply filters to the invoice list to show unpaid and overdue invoices, as well as filter invoices for a specific customer.
Customer account statements can be downloaded and sent to your customer which include any balance due and a list of invoices linked to that client. Debitoor also offers payment reminders to remind the customer that payment is overdue.
Start taking control of your overdue invoices with a 7-day trial.