Company's Financial Accounting
Accounts Receivable Aging Report. Template in Excel
The Accounts Receivable (AR) Aging Report (in Finnish, myyntisaamisten ikääntymisraportti) is a crucial part of cash flow planning. Accounts receivable arise when there is an agreement between company and its customer to pay for provided goods or services for some agreed period of time, for example, within 10, 30, 45, 90 days. If some customers do not comply with the contract provisions and the prescribed payment deadlines specified in the contract, then the overdue debts or bad debts appear.
In case of large number of unpaid invoices or late payments, the business can experience a temporary or permanent cash flow problems. The question is, that outstanding invoices aren’t just an inconvenience, but is a serious problem for the enterprise, because it can threaten the very existence of the business. In the situation of cash flow interruption, company won’t t have the money to keep the business operational. Company will not be able to pay suppliers, employees, utilities, rent and cover other operational expenses.
An accounts receivable aging report is a summary of customers' unpaid invoices composed according to date categories. The idea of this report is to classify the accounts receivables according to their maturity dates. Thus, it becomes possible to identify debtors with a large share of overdue invoices, and as a result, reduce own risks by reducing or refusing the sales on credit for those customers.
The assessment of the likelihood that certain receivable won't be collected is usually based on previous experience. However, the general rule is that the older the unpaid invoice, the more likely money will not be collected.
The Accounts Receivable AR Aging Report does not have a generally accepted form; however, it is usually a table in which the receivables are categorized according to their payment terms, and broken down into different aging categories based on the time since the invoice was issued. Typically, overdue receivables are classified as follows:
- less than 10 days
- 10-30 days
- 30-60 days
- 60-90 days
- more than 90 days
Usually, AR aging report include the following important information:
- Customer name
- Invoice numbers
- Invoice dates
- Due dates
- Overdue days
- Invoice amount
- Overdue amount
- Total accounts receivable amount
- etc.
In order to estimate the size of the bad accounts receivable, just multiply the overall balance of each aging category by the corresponding probability of non-payment of the debt, i.e. by an estimated percentage of uncollectibility for that category. Resulting total of all such balances will be considered as bad debts.
Why it is useful to compile AR Aging Report?
The main advantages of Accounts Receivable Aging Report writing:
- there is a possibility to assess the short-term and long-term solvency of the company’s customers;
- company's management have an idea about the speed of accounts receivables' collection;
- it is possible to forecast doubtful debts;
- company can estimate and create bad debt reserve, i.e. an allowance for doubtful accounts entry.
AR Aging Report, free download template in Excel format
English, Russian and Finnish versions
| Name | File to download |
|---|---|
| AR Aging Report | DOWNLOAD FREE |
| Отчет о старении дебиторской задолженности | СКАЧАТЬ БЕСПЛАТНО |
| Myyntisaamisten ikääntymisraportti | LATAA ILMAISEKSI |