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Accounts receivable aging report: definition, uses, and guide


What is an accounts receivable aging report?

An accounts receivable aging report groups a business's unpaid customer invoices by how long they have been outstanding. The report categorizes receivables into age categories. It helps estimate uncollectible receivables and can improve collections.


As a small business owner, there's nothing more disgruntling than not getting paid. That's where an accounts receivable aging report comes into play. Business owners use accounts receivable aging reports to determine which customers have invoices with outstanding balances. This collection tool makes it easy for businesses to identify late-paying customers and set invoice payment terms.


To help you get started, we’re answering your common questions and addressing the basics of accounts receivable aging reports.

What does an accounts receivable aging report show you?

Example of an accounts receivable aging report.

An accounts receivable aging report, also known as an aging schedule, will include unpaid invoices from your accounts receivable (A/R). You group your customer invoices into date ranges rather than listing specific dates for when an invoice is due.


Invoice date ranges commonly found on an aging schedule include:


  • Current: Invoices not past due
  • 1–30 days: Past due for 1–30 days
  • 31-60 days: Past due for 31–60 days
  • 61–90 days: Past due for 61–90 days
  • 91+ days: Past due for 91 or more days


Depending on your preferences, you can adjust date ranges in your A/R aging report. Business owners use the aging schedule to determine which clients are paying on time and which clients have outstanding invoices. It’s also useful for cash flow purposes and to help you collect outstanding payments.


With this report, you’re able to look at which customers owe money and how behind they are on payments. There are many benefits of using accounts receivable aging reports.


Why accounts receivable aging reports are important

What accounts receivable aging reports can help with: Tracking outstanding invoices, avoiding late payments, spotting credit risks, and adjusting selling practices.

An accounts receivable aging report is a financial report businesses use in their accounting. This report helps companies analyze their customers' outstanding invoices. AR aging reports help businesses maintain a healthy cash flow. Without it, it’s difficult to identify credit risks for your company. 


Putting together regular accounts receivable aging reports, which you can easily do with invoicing software, allows you to identify regular late-paying customers. You can then avoid sending goods and services to customers before late payments become an issue and hamper cash flow.


AR aging reports are important because they can help businesses keep track of outstanding payments from customers. You can generate an accounts receivable aging report to calculate and improve your accounts receivable turnover ratio


This can be done with QuickBooks software as well. ​​You can see which customers have past due balances in QuickBooks—and how long each transaction is past due—by going to reports in your software and visiting the “Who owes you” section, then selecting “Accounts receivable aging detail.” 


As a business owner, the last thing you want is to sell your products or services and not get paid or be paid late. That’s why it’s important to stay on top of your finances and keep track of who owes you to maintain your company’s financial health.



How to create an AR aging report

The four-step process to create an AR aging report: 1. gather unpaid invoices, 2. calculate days past due, 3. categorize invoices, 4. create an aging schedule.

Preparing an accounts receivable aging report is relatively straightforward. To get started, follow these steps:

1. Gather unpaid invoices

In step one, you’ll gather all the unpaid invoices you have for customers. That’s any invoice with an open balance on it, even if it’s a partial balance. 

2. Calculate days past due

For each invoice, you’ll want to calculate the number of days past due. For example, if the invoice was due on the 15th and it’s now the 22nd, the invoice is seven days past due.

3. Categorize invoices

Next, you'll want to group each of the customer’s invoices according to the aging schedule. 

For example, a customer has the following unpaid invoices: 

  • One invoice for $1,000 that is not past due
  • Two invoices that total $1,500 and are 15 days overdue
  • One invoice for $100 that is 37 days overdue 

You would then categorize those invoices based on your aging schedule ranges. A sample accounts receivable aging report would then be: 

  • Current: $1,000
  • 1–30 days: $1,500
  • 31–60 days: $100

4. Create an aging schedule

You’ll list all your customers that have an open invoice and then do the same thing we did in step three for all your customers. Once complete, you can total the amounts to see how much of your invoices are current, 1-30 days past due, and so on. 

A/R aging reports aren’t perfect, however. For example, many business owners bill customers toward the end of the month. This can make an aging A/R report misleading because if a customer pays just a few days later, it can show up as past due on the report.


Best ways to use an AR aging report

How to use accounts receivable aging reports: Manage cash flow, estimate bad debt, and adjust credit policies.

A/R aging reports can tell you a lot about your business, such as how effective your collection payment practices are and how you manage cash flow. You can also use your accounts receivable aging report for a variety of purposes, such as:

Manage cash flow

Adequate cash flow is essential to running a successful business. With an aging report, you can identify problems in your accounts receivables. 

Then you can take steps to get clients to pay their invoices faster, which can help prevent future cash flow issues.

Estimate bad debt

An aging report for accounts receivable can help estimate bad debt, which is uncollectible payments. Bad debts typically form when customers receive credit they are unable to pay back. A best practice for businesses is to use an aging report to make an estimate of bad debts for each period.

For example, let’s say a company allows a:

  • 1% bad debt allowance for the 0–30 day period
  • 5% bad debt allowance for the 31–60 day period
  • 10% bad debt allowance for the 61–90 day period
  • 15% bad debt allowance for the 91+ day period

Now let’s say the company’s accounts receivable aging report lists:

  • $200,000 in the 0–30 day period
  • $175,000 in the 31–60 day period
  • $100,000 in the 61–90 day period
  • $75,000 in the 91+ day period

Using that information, this company will have an allowance for doubtful accounts of $32,000. To find this, use the following formula:

  • ($200,000 x 1%) + ($175,000 x 5%) + ($100,000 x 10%) + ($75,000 x 15%)
  • 2,000 + 8,750 + $10,000 + $11,250 = $32,000

Estimating bad debts allows a company to revise its allowance for doubtful accounts. Companies usually use previous A/R aging reports to determine the historical percentage of invoice dollar amounts for each date period that resulted in bad debts. 

Typically, the longer a debt goes uncollected, the higher the chance it remains uncollected. Businesses must keep this in mind as they manage their finances. This way, they can adjust how much debt they can afford to go uncollected.

Adjust credit policies 

One of the main uses of an accounts receivable aging report is to identify customers behind on payments. If you go through your aging report and notice a single client is responsible for most of your late payments, you can proceed with any necessary measures. 

However, if you see multiple clients are late on payments, it might be an issue with your customer credit policy. If this is the case, you can compare your credit risk to industry standards to see if you’re taking too much credit risk.

Accounts receivable aging reports allow you to analyze how your collection processes are going. If you have a lot of old accounts receivable balances, especially after 60 or 90 days, your collection processes may need to be revised. 

If you notice this trend, you can adjust your collection practices, such as sending invoices right away or working with a debt collection agency. This way, you can ensure clients pay the total amount due in a timely manner and improve your days sales outstanding average.


Run your business with confidence

Once your accounts receivable aging report is ready, you’ll be able to spot which customers are late, how late they are, and how much they owe. You can then take action to get your outstanding payments addressed, such as sending a follow-up invoice or reaching out to a collection agency.

With an accounting solution, you’ll be able to generate accounts receivable aging reports. QuickBooks accounting solution is extremely flexible, allowing you to customize customer settings to send invoices and reminders. This way, you can stay on top of customer payments and take action when needed.


Accounts receivable aging report FAQ

Here are the top accounts receivable aging report questions that business owners have: 

What is the purpose of an aging report? 

An aging report lists a company's outstanding customer invoices and payment due dates. Aging reports help track how long customers owe money to identify collection issues or determine credit terms. They also help manage cash flow and working capital.

What is an example of aging an accounts receivable?

An example of an accounts receivable aging report is sorting invoices by their outstanding date. For example, the accounts receivable for a customer is $5,000. The amount that is current is $2,500, while the other $2,500 is over 30 days past due. 

What is a good AR aging percentage? 

A good AR aging percentage will vary by the industry and credit terms the company offers. However, in general, the lower the AR aging percentage, the better. You can find the AR aging percentage by dividing the total amount of receivables that are over 90 days past due by the total amount of receivables outstanding.

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