Aging Report
A financial report categorizing outstanding invoices or payables by how long they have been outstanding, used to manage collections and payment prioritization.
FAQs
How does the aging report help estimate bad debt reserves?
The aging method for estimating the allowance for doubtful accounts applies different uncollectability percentages to each aging bucket based on historical experience — e.g., 1% of current invoices, 5% of 31–60 day, 15% of 61–90 day, 40% of 91–120 day, 75% of 120+ day. Summing these estimates produces the required allowance balance, with the income statement catch-up recorded as bad debt expense.
How frequently should the AR aging report be reviewed?
High-volume B2B businesses should review AR aging weekly, with senior collections staff reviewing accounts in the 60+ day buckets daily. Lower-volume businesses may review bi-weekly or monthly. Automated AR platforms can trigger collections workflows automatically when invoices cross aging thresholds, removing the need for manual report review.
What is a 'clean' AR aging report?
A clean AR aging has the vast majority of balances in the 0–30 day current bucket (ideally 90%+), minimal amounts in 31–60 days, and very little in 60+ days. Industry benchmarks vary, but any company with more than 20–25% of AR over 60 days past due has a meaningful collections problem that warrants immediate attention.
Related Terms
Accounts Receivable
Amounts owed to a business by customers for goods or services delivered but not yet paid for.
Days Sales Outstanding
The average number of days a company takes to collect payment after a sale, measuring accounts receivable collection efficiency.
Dunning
The process of systematically communicating with customers to collect overdue payments, through a sequence of increasingly urgent reminders.
Days Payable Outstanding
The average number of days a company takes to pay its vendors, measuring how efficiently a company manages its accounts payable.