Harness Money

What is accounts receivable aging?

Accounts receivable aging is a method used to categorize and analyze a company’s accounts receivable based on the length of time the invoices or payments have been outstanding. It helps businesses monitor and assess the collection status of their receivables and identify any potential issues with late or unpaid invoices.

The aging process involves dividing the accounts receivable into different time periods, typically in buckets such as 30 days, 60 days, 90 days, and so on, based on the due dates of the invoices. The purpose is to track how long invoices remain unpaid and to determine the level of risk associated with each category.

By generating an accounts receivable aging report, a company can gain insights into its overall receivables portfolio. This report provides a snapshot of the outstanding amounts, segregating them by the number of days past due. It helps identify overdue payments, allows for targeted collection efforts, and enables the company to estimate potential bad debts.

Analyzing the accounts receivable aging report regularly can assist in managing cash flow, identifying slow-paying customers, determining the effectiveness of credit and collection policies, and taking appropriate actions to ensure timely payment and reduce the risk of bad debts.