How Creditors Use Accounts Receivable Aging Reports

Accounts ConceptSavvy credit grantors track the aging of their Accounts Receivable. This enables them to determine the financial health of their customers. They categorize them according to how long invoices have been outstanding. If an Accounts Receivable Aging Report shows that a customer’s receivables are being collected more slowly than normal, this can be a sign that their business is slowing down. Or it may mean that the credit grantor is taking greater credit risk in its sales practices.

Measuring Credit Risk

Accounts receivable aging can be used as a management tool. A report is typically broken into date ranges of 30 days. It shows total receivables that are currently due, as well as receivables that are past due. If it indicates that a customer chronically pays late, the company may determine that the customer is not a good credit risk and that they should take stronger measures recover the debt, or stop doing business with them.

When estimating the amount of bad debt to report on a company’s financial statements, the Accounts Receivable Aging Report can help to estimate the total amount to be written off or to otherwise determine the allowance for doubtful accounts. One method is to apply a fixed rate of default to each date range. Give invoices that have been outstanding for longer periods of time a higher default rate, as they are more likely to default. By adding the products from each outstanding date range, you can come up with an estimate of the amount of uncollectable receivables.

Gauging and Improving Financial Health

Negative findings from Accounts Receivable Aging Reports can be improved in various ways. Account receivables are derived from the extension of credit. If a company experiences difficulty collecting accounts, specific customers may be kept on a cash-only basis. Mailing reports to customers along with the month-end statement provides a detailed account of outstanding items. Faced with the big picture of what they owe may encourage a customer to make more prompt payments. Your reports can be useful internally and externally.

Adding an Aging Schedule

An Aging Schedule shows the relationship between a company’s bills and invoices and its due dates. Often created by accounting software, aging schedules can be produced for both accounts payable and accounts receivable. They help a company see whether its customers are paying it on time, and if it is current on its payments to others.

An Aging Schedule often categorizes accounts as current (under 30 days), 1-30 days past due, 30-60 days past due, 60-90 days past due, and more than 90 days past due. Companies can use aging schedules to see which customers it needs to send payment reminders to or, if they are too far behind, send to collections either by an agency or a law firm. Of course, companies want as many of their accounts to be as current as possible, and they will most often see the quickest recovery results by going right to a firm specializing in collections.

Predicting Cash Flow

By classifying anticipated income by the number of days since invoices were sent out, Aging Schedules can help companies predict their cash flow. They also may be used by creditors to help evaluate whether to lend a company money. Auditors use aging schedules to evaluate the value of a firm’s receivables.

If the same customers repeatedly show up as past due in an accounts receivable aging schedule, the company may need to re-evaluate whether to continue doing business with them. An accounts receivable aging schedule can also be used to estimate the dollar amount or percentage of receivables that are probably uncollectible.

Recovering the “Uncollectible”

Don’t give up on accounts receivable until you’ve filed a claim with a creditors’ rights attorney who meets your specific needs. Go to to find the perfect attorney in your area. Then stay to look around at the other resources, products and services that are there at your fingertips.

For other ways to collect on unpaid invoices, contact The National List at 800-227-1676, or email results@nationallist,.com.

Categories: ARM Industry, business debt, collect overdue receivables, Commercial collections, Creditors Rights Law Firms, NL Insider, old debt, Overdue Receivables

Tags: , , , , , , , ,

Leave a Reply

%d bloggers like this: