What an Accounts Receivable Aging Report Shows
An accounts receivable aging report lists who owes the business money and how long each balance has been open. Many accounting programs build one in a few clicks. In QuickBooks Online it’s under Reports, in the “Who owes you” section, as the accounts receivable aging summary.
The layout is the same almost everywhere. One row per customer. Then columns that sort each balance by age:
- Current: invoiced, not yet past its due date
- 1 to 30 days: past due by up to a month
- 31 to 60 days
- 61 to 90 days
- 91 and over
The summary shows totals by customer. A detail version lists every open invoice, which is the one to pull when a balance looks wrong. One setting worth checking: the report can age invoices from the due date or from the invoice date, and the two give very different pictures. Aging from the due date is the usual choice, because it shows what is actually late.
Every business that sells on terms is, in a quiet way, extending credit to its customers. The aging report is how an owner sees what that credit looks like today. It’s also one of the first things a factoring company asks to see. At K.W. Receivables, the aging report is where a conversation about accounts receivable factoring usually starts, because it shows which customers pay and how fast.
A Sample Report, Line by Line
Here is a made-up example for a small Texas supplier with $40,700 in open invoices. The customers and numbers are invented to show how to read one.
- Customer A: $18,000, all current
- Customer B: $12,500, with $8,000 current and $4,500 at 31 to 60 days
- Customer C: $9,000, all at 61 to 90 days
- Customer D: $1,200, all at 91 and over
At a glance this looks fine. Most of the money is current. But read it line by line and three different stories show up.
Customer A is a good customer. Nothing to do.
Customer B is paying the newer invoices and skipping an older one. That pattern often means a specific invoice is stuck: a missing PO number, a disputed charge, a delivery that wasn’t signed for. It usually takes one phone call to find out.
Customer C is the real concern. All $9,000 is between 61 and 90 days, and nothing newer is open, which can mean the customer stopped ordering and stopped paying at the same time. That’s 22% of the total sitting in one late account.
Customer D is small, and small old balances are easy to ignore. They also tend to be the ones that don’t get paid.
The cost of carrying slow accounts like C and D is what owners are weighing when they look at factoring fees and pricing, so it helps to know those numbers before that conversation.
If a report shows more than a couple of lines like C and D, it’s worth having someone look at it with fresh eyes. Owners in the Houston area can bring an aging report to our office and go through it with us.
The Lines That Should Worry You
A few warning signs tend to show up before an account goes bad:
- A customer moving right. A balance that was current last month and is in 31 to 60 this month. One month can be a fluke. Two months in a row is a trend.
- Older invoices skipped, newer ones paid. Usually a dispute or missing paperwork, and it gets harder to fix the longer it sits.
- One customer holding a big share of the total. If a single customer is a third or more of receivables, the business depends on that customer’s habits.
- Partial payments with no explanation. A short payment is often a deduction the customer took for a reason nobody told the seller about.
- The 61-plus columns growing every month, even if total sales are up.
What to Do When a Customer Drifts Into 60 and 90
Call. Not email, call, and ask for accounts payable by name if possible. Find out whether the invoice is approved, disputed, or simply lost.
If it is disputed, fix the paperwork or settle the disagreement in writing. If it’s approved and just slow, ask for a payment date. If the customer has stopped paying altogether, slow down new work or new credit until the old balance moves. That last step is uncomfortable, and it is also how a 90-day problem stays a 90-day problem instead of becoming a write-off.
One Number to Track: DSO
Days sales outstanding turns the aging report into a single number. The formula: accounts receivable divided by credit sales for a period, multiplied by the days in that period. A business with $40,700 in receivables and $36,000 in credit sales last month has a DSO of about 34 days. For comparison, a business whose customers all paid exactly on net 30 terms would sit close to 30, so this one is running a few days slow.
Watch the direction more than the number itself. A DSO that climbs from 35 to 45 over a quarter says customers are paying slower, even if no single account looks alarming yet.
Making the Report a Weekly Habit
The aging report only helps if someone reads it. Fifteen minutes on a Monday morning catches many problems while they are still phone calls instead of collection letters.
It also shows where cash is tied up in good accounts. Customer A in the example owes $18,000, all current, and will almost certainly pay. That’s the kind of invoice a factoring company buys, and it’s money a business can have now instead of in 30 or 60 days.
How K.W. Receivables Can Help
K.W. Receivables has helped Texas businesses manage receivables since 1991. Customer credit checks are free, and on the invoices we buy, we handle the collection work. To talk through what your aging report is telling you, call K.W. Receivables at (281) 446-5444 or start an application.
