The Importance of the Accounts Receivable Aging Report

As an assessment and diagnostic tool, it’s hard to overstate the importance of your company’s accounts receivable (AR) collections aging report. Also known as “accounts receivable reconciliation,” this is a common report that offers a broad overview of a company’s financial status as well as the status of its customers and their abilities to pay.

What Is an AR Aging Report?

An aged receivables report is a tool that categorizes your company’s receivables in accordance with how long invoices have been outstanding. This report is a valuable tactic to stay on top of cash flow and improve short-term collections forecasting.

A collections team can use the accounts receivable aging report to review how long an invoice has gone unpaid as well as the balance of all unpaid services.

Here’s a quick example of how a basic AR aging analysis looks:

CustomerA/R0-30 Days31-60 Days61-90 Days90+Days
Company A$18,000$11,000$7,000
Company B59,00022,00020,00017,000
Company C117,00067,00031,00012,0007,000
Company D15,00015,000

Run an AR aging analysis regularly to get an idea of your financial health and which clients need to be followed up.

Why Are AR Aging Reports Necessary?

An AR collections aging report provides important data on customer payment behaviors and the effectiveness of crediting/collection functions. Running an AR collections report regularly (usually weekly or monthly) helps you understand what to expect from customers in terms of payments. It also identifies cash flow issues before they become problems.

Cash flow problems usually relate to collection policies or customer behavior. Certain clients may be delinquent more often than others. AR aging reports provide concrete information that can be used to take action.

A good example is making the choice to withhold services for clients beyond your payment grace period. Finding the right balance between grace periods and service restrictions is easier with regular collections reporting. It ensures you don’t lose money providing services that will never be paid.

An aging report also analyzes how your customers’ companies work. This ensures your invoicing processes are aligned with their accounts payable.

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Why Automation Is Key to Effective AR Aging Reporting

Automation is well-established as a functional tool for efficient accounts receivable management. Many accounts receivable management platforms support automated reporting functions due to the great benefits they provide to a company’s AR workflows and overall efficiency:

  • Access reports in an instant – Does your team spend too much of the workday collecting data and generating reports? Automated solutions streamline the process by quickly pulling and organizing data based on pre-set parameters in your software. It’s the simplest way to spend less time creating reports and more time actually reviewing those reports.
  • More accurate payment forecasting – With streamlined reporting behind you, it’s far easier to accurately manage cash flow accounting, behavior monitoring, and customized allowances for doubtful accounts. Plus, automation takes some of the human element out of the equation, which substantially reduces errors.
  • Reduce reporting time and effort – Manual collections work is time-consuming and tedious. It delivers poor workflow efficiency which is frustrating for your team.
    In Smartsheet’s Automation in the Workplace, over 40% of workers surveyed spent at least a quarter of their workday on manual tasks across emails, data collection, and data entry. Leverage automation to eliminate inessential tasks and leave teams free to focus on more interesting, productive work.

Staying on Top of Accounts Receivable Aging

Aging of accounts receivable payments is inevitable for most companies. Accounts receivable automation offers the best way to stay one step ahead.  

By relying on an automated system, collections teams reduce errors and trust their data is accurate. With just one click, aging reports can be built and presented to stakeholders.

Make the process easier with our automated solutions. Don’t waste another day preparing and generating reports manually. With Gaviti’s solution, you might be surprised just how simple collections management can be!

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The CFO Guide: How to Build and Scale Your Collections Team Like a Rockstar
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