What is an Accounts Receivable Aging Report, and why do they matter?

An account receivable aging report is especially helpful for enterprises that are known for extending credit to their customers. If customers frequently fail to repay their credit obligations, it may be necessary to reduce the amount of credit that the business offers or change the terms. The report is also valuable because it can show you who your worst debtors are at the moment. It may be necessary to retain the services of an outside collection agency or even consider legal action if you are in a situation where former customers are refusing to settle their accounts.

Small businesses can lose thousands or even millions of dollars each year if they are unaware of the aging of their accounts receivable. In some cases, debts may go unpaid for years without any negative consequences for the debtor or action on the part of the aggrieved business. Luckily, Ignite Spot can help you by developing the clear, actionable reports that you need. When you began your business, the intricacies involved in generating an accounts receivable aging report might not have occurred to you. As your small business grows, however, these and other reports will become increasingly important in ensuring your business has a sound financial foundation.



An additional use of the aging report is by the credit department, which can view the current payment status of any outstanding invoices to see if customer credit limits should be changed. This is not an ideal use of the report, since the credit department should also review invoices that have already been paid in the recent past. Nonetheless, the report does give a good indication of the near-term financial situation of customers.

An aging report is a critical tool used by collections personnel to determine which invoices are overdue for payment, and by how long. Most aging reports will also have the clients' contact information. As an A/R professional, your work performance may be graded based on these reports, so it's important to understand what these reports are and why they matter. Most aging statements address invoices in 30-day sections so that you can run a report based on 30 days, 31-60 days old, 61-90 days past, and so on. Briefly explain to the interviewer what you understand an A/R Aging Report to be, and why they matter to you as an accounts receivable specialist.

"An accounts receivable specialist will look at an aging report and be able to see a snapshot of clients who frequently fail to pay their invoices on time, or meet their extended credit obligations as per the contract agreement. This report allows A/R staff to fry the biggest fish first - the companies or people who owe the largest amounts of money. This report is especially important if collection agencies need to be engaged, or when customers are ignoring their outstanding debts."