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It has often been said that “cash is king.” A key element of cash management is accounts receivable and the accounts receivable aging report is the document that helps every business owner manage his/her accounts receivable effectively. 

What is an Accounts Receivable Aging Report 

An accounts receivable aging report is a vital accounting document that provides a record of outstanding payments due from customers and how long they are past due. This report is an essential element of an enterprise’s operating budget. All unpaid invoices will be listed, giving business managers a solid overview of the health of the business’s receivables and cash flow.

Financial Implications from Your Report 

No business can survive by offering its products and services for free so it is critical to keep track of all payments due so they can be collected. Late payments can be disruptive to healthy cash flow. 

Consider these implications of using an accounts receivable aging report effectively:

  • It will help identify cash flow issues and avoid troublesome cash crunches.
  • It will identify the effectiveness of the company’s credit terms and collections processes so they can be revised and improved.
  • It will reveal irregularities in the collection process.
  • It will identify customers who make frequent late payments so the company can take appropriate actions to correct that behavior.
  • It will help to analyze customer payment behavior so a company can revise its invoice timeline to get paid on time.
  • It will help a company to determine whether to withhold further products or services from a customer, or whether to send an invoice to a collection agency. This is an element of estimating bad debt risks.
  • It can help improve a company’s inventory management.               

What is Included in an Accounts Receivable Aging Report 

An accounts receivable aging report will typically have these components: 

  1. A list of all customers who owe money to the company. 
  2. Invoice details for each customer payment including the invoice number, date of invoice issuance, the amount owed, outstanding balances, and due dates. 
  3. Invoices will be categorized based on the length of time they are past due such as 1-30 days, 31-60 days, 61-90 days, and so on. 
  4. A summary report that totals the outstanding balances for each aging category, with an overall total. 
  5. Notes may be added to provide any explanations necessary for special situations.      

Accounts Receivable Mistakes 

Effective use of an accounts receivable aging report and avoiding accounts receivable mistakes helps prevent financial losses, wasted time, and negative customer relationships. 

It is important to avoid these accounts receivable mistakes: incorrectly listing information on an invoice, miscommunicating with accounts receivable team members, not following up properly or in a timely manner on overdue invoices, making it difficult for buyers to pay, and applying payments to the wrong invoices.

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Contact CAB Capital for small business financing solutions that can be faster or more flexible than other financing solutions. We have access to a vast suite of more than 150 products from a group of 67 different lenders so we can ensure you get the funds and the terms you are looking for.