Setting up an accounts receivable (A/R) aging schedule is a critical accounting tool for every successful business because it allows owners to manage outstanding invoices and continually gauge the financial health of their business.

A typical aging report lists unpaid invoices by date ranges; consolidating all invoices that are less than 30 days overdue, more than 30 days overdue, more than 60 days overdue and more than 90 days overdue. 

However, the importance of having an A/R aging report goes beyond simply having a snapshot of the customers that have fallen behind on their payments. Although, falling behind can be a sign of an underlying problem, understanding how to use the report rather than just reading it provides insight into your customers’ habits.

For example, having no clients more than 60 days overdue likely means that your business is running smoothly (financially, at least). But, consistently having certain clients wait until as close to the 90-day mark as possible to pay is an indication that it’s time to reconsider how you manage your invoicing.

One tactic is to invoice at the beginning of every month for monthly services rather than at the end of every month. Your client (or clients) are already in the habit of paying at the 90-day mark, so by billing them ‘before’ services are provided, payment will technically be received sooner. It’s a simple cash flow management strategy that is based solely on understanding the habits reflected in your A/R aging report.

And once you recognize habits, you better understand whether a client simply delays paying or whether an invoice (or invoices) needs to become a collections issue.

Share this

Latest Insights

Recent posts from our blog

How to plan for seasonal variances in your cash flow

Have you noticed unexpected seasonal variances in your company’s cash flow? If your business is seasonally-based (a lawn care or snow removal company, for example), it’s normal for your cash flow to vary depending on the time of year. Unfortunately, many companies who shouldn’t be affected by the seasons still experience peaks and valleys in […]

Organizational growth and restructuring: Is your business ready to take the next steps?

Are you planning to take your business to the next level? Before you start growing your company, you need to ensure that your organizational structure is prepped for this major shift. Don’t just jump in head first – make sure you follow our key prep tips to keep your growth sustainable and successful.   3 […]

Do you have a file you need to send to us? Would you like to make a payement?