Prepare and Use an Accounts Receivable Aging Report #aged #accounts #receivable #report


How to Prepare and Use an Accounts Receivable Aging Report

An accounts receivable aging report is an important report to review at least monthly, or more often, to be sure your customers are paying you.

What are Accounts Receivable?

Accounts Receivable ( sometimes called receivables or A/R ) are those amounts owed to a company by its customers. You might consider them as payments due to my business.

Receivables are considered a business asset because they have value, as the total amount owed to your business.

Receivables are ranked high in the list of assets because of their ability to be converted into cash. Accounts receivable show up on the company s balance sheet. because these amounts owed are considered as assets. As soon as they are paid off – we hope – they will become cash.

Some cash businesses or businesses that rely heavily on customer use of credit cards may not have many receivables. But if you have a business in which you bill customers and you offer them terms (payment over time, you ll need to be able to run an A/R aging report allows you to see what is due from each customer.

Accounting Method and Receivables

If your business has customers who don t pay immediately, you are probably using the accrual accounting method (as opposed to cash accounting). This accounting method recognizes income when it s billed, not when the money is collected. That means you must pay tax based on income which you may not have received.

The process of collecting money from customers in this type of business begins with an invoice – a bill to a customer. The invoice states the amount due and when it is due, including terms of payment. The payment terms sometimes include a discount for early payment.

The accounts receivable report is based on the amount and terms stated in the invoice for that customer.

What is an Accounts Receivable Aging Report?

Accounts Receivable Aging (sometimes called an accounts receivable reconciliation ) is a process of categorizing all the amounts owed by all customers, including the length of time the amounts have been outstanding (unpaid), thus you are considering their age, or aging this information. The standard categories for this type of report are:

  • Current – due immediately
  • 1 – 30 days – due within the next 30 days
  • 31-60 days – a month overdue
  • 61 – 90 days – two months overdue
  • 91 and over – more than two months overdue

If a customer has several bills that were incurred at different times, the report will show how much is due at what time. For example, for Jim Jones:

The purpose of this accounts receivable aging is to show the business owner what receivables need to be dealt with more urgently because they have been overdue longer.

The Accounts Receivable Aging Report is a standard report provided with all business accounting software programs. including online systems.

Why is An Accounts Receivable Aging Report so Important?

Rule #1 in debt collection is The longer a debt is owed, the less likely you are to be able to collect it. So, knowing about your customers and their debts is vital to collecting from them.

One of your most important debt collection tools is an accounts receivable aging report.

How Do I Read and Use An A/R Aging Report?

Read an accounts receivable aging report remembering Rule #1 of Collections/ Here are some guidelines to consider when reading an a/r aging report:

First, look at the greatest amounts of money owed by all customers. Are these amounts current? Are they 30 days? Or have these bills been outstanding for 120 days or more? Working on the 80/20 principle. going after the biggest offenders (using your collections management system, of course) will bring you the highest return. Determine how you will handle each of these large bills, write up a plan, and have your accounts receivable manager start working.

Next, look at those bills which have been due for a long time. Determine whether you are ready to take this customer to the next step of the collections process: collections agency, or small claims court .

Or do you think this bill is un-payable?

Finally, use your collections system to determine how you will contact all customers with bills 30 days overdue or more. Let the system guide you, but don t hesitate to make exceptions. For example, you might know that a customer s wife has terminal cancer, and you might decide not to take that person to court. It is your company; you get to decide.

You might also want to calculate a business analysis ratio called average collection period. This calculation show the number of days, on average, it takes to collect on your business sales. Over time, you can see if this ratio goes up (taking a longer time to collect.)

If you work to improve your collections rate, using the accounts receivable aging report and other financial analysis tools like the average collection period, you can improve payments and have more cash in your business.

In conclusion, you can use an accounts receivable aging report to make decisions on next steps for all customers who owe you money. Use the collections process you set up, and always remember Rule #1.

Back to Getting Paid: Setting Up Your Collections System

Accounts Receivable Financing #accounts #receivable #financing #companies


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Crestmark’s Accounts Receivable Financing

Accounts receivable financing (A/R financing), sometimes known as a ledgered line of credit or invoice financing, is a great solution for businesses that need more funding that is not available from traditional lenders. Many companies need additional cash flow to support seasonal demands, growth, business opportunities, or solve a short-term cash need. Accounts receivable financing provides your business with flexible and immediate cash that will give your business the opportunity to grow, restructure, take advantage of supplier discounts, hire additional employees, or even to fund payroll. With our accounts receivable financing options, you can access cash without having to give up equity in your company, and it is less restrictive and expensive than equity financing. A/R financing can increase or decrease based on your current business size and needs, allows you to gain administrative support to manage your receivables without additional staff, and gives you access to cash when you request it (based on your eligible accounts receivable).

How Accounts Receivable Financing Works

After you invoice your customer for goods or services completed you provide Crestmark with a copy of the invoice and supporting documentation. Crestmark may then advance up to 90% of the eligible invoice to you, often within 24 hours. Our professional and efficient invoice management team follows up to help ensure that your customer pays according to your invoice terms. Once we receive your customer payment, we’ll release the remaining 10% to you, less an administrative fee. And, with our timely detailed web-based reporting, you can check to see who has paid and who has not 24/7.

This accounts receivable financing process will free up valuable time and allow you to what you do best, service your customers and generate new business. Receivables management is proven to shorten payment turnaround time, which in turn, ensures better cash flow for your company and reduces interest expense. It also facilitates increased communication with your customers in a positive and professional manner, thus allowing you to stay on top of damaged goods, lost shipments, misplaced or disputed invoices, or keeping payments current.

And, because this form of financing allows you to access more cash as your business grows, or less if you need less, you can ask us to either ramp up, or scale back as you deem best for your business.

Accounts Receivable Financing Highlights

Primary Transaction Size

Start-ups to $7.5 Million

Customer credit reviews for new and existing customers
Invoice processing
Collection services (in some cases)
Customized management reports

Accounts Receivable Financing Benefits

Are flexible, can increase as your business grows, and can decrease when you choose
Make it easy to transition back to conventional banking
Make paying off loans and making payroll worry-free
Allow you to meet seasonal demands
Give you the opportunity to reinvest in business and fund marketing to grow your business
Receivables management allows you to focus on your core business
Allows you to take advantage of volume or early payment purchase discounts

Crestmark’s A/R Benefits

Competitive pricing
Fast response time including:
Proposal turnaround within one day
Closing in as early as 7-10 days
Cash for invoices within 24 hours

Is A/R Financing The Right Solution For Your Business?

Your business is unique with working capital needs all its own. Our professional, experienced Business Development Officers will work with you to understand what accounts receivable financing solution best fits your business and cash flow needs, and a team of financing specialists will create a working capital solution specialized for you.

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