How to Leverage Insights from an Accounts Receivable Aging Report

An AR aging report is one of the simplest tools a business can use to find and address cash flow risks before they become real problems. 

Overdue receivables can pose a risk to companies, and they should be addressed like any other threat: define the problem, then take appropriate action. An accounts receivable aging report can enable you to do just that. 

The aging report helps companies calculate overdue amounts and timelines, providing enough detail to identify problem areas and take informed action to improve accounts receivable health. 

What is an aging report?

An aging report lists a company’s outstanding invoices by buyer and days overdue. Reviewed regularly, it offers key insights into your receivables and is an important tool in improving cash flow.

A basic aging report might look like this:

If you accelerate invoices with C2FO Early Pay™, you already have access to aging reports. Visit Invoice Central in your account to view your invoices in a single location.

Why is an accounts receivable aging report important?

An accounts receivable aging report provides a clear, proactive view of your business’s cash flow health and where to take action. For instance, a report can flag increases in overdue receivables, which can influence spending decisions. 

Aging reports also help quantify how much of your receivables are bad debts that will never be collected. This allows you to adjust overall reporting to reflect the true state of your business finances.

Having accurate, up-to-date receivables data is also essential for lenders and investors evaluating risk. Your AR aging analysis could impact financing approvals and funding costs.

How to use an aging report

An aging report for accounts receivable shows which of your buyers are falling behind on payments so that you can take action. Here’s how you can leverage an aging report:

• Examine broader trends. Track AR patterns like average payment timelines and buyer behaviors over time to spot cash flow issues or bad debts early.
• Segment the report by buyer size or industry. Different businesses may respond better to different interventions. For example, larger buyers may respond to early payment incentives, while smaller buyers might simply need automated reminders.
• Investigate AR processes. Look closely at invoicing and collections workflows, since overdue balances often stem from invoicing errors or communication breakdowns. Once identified, these issues are usually easy to fix.
• Set new terms or early payment incentives. Consider renegotiating terms to keep late buyers on track, or encourage faster payments with programs such as C2FO Early Pay.

The bottom line about aging reports

An accounts receivable analysis can give you the visibility needed to diagnose issues and take steps to strengthen collections and overall cash flow. 

FAQ

What is an accounts receivable aging report and why is it important?

An accounts receivable aging report lists your outstanding invoices by buyer and days past due. This type of report is important because it provides a clear view of overdue receivables, helps you identify potential bad debt and credit risks, and enables you to take informed action to protect cash flow.

How often should a business review its AR aging report?

Most businesses should review their aging report at least weekly, and more frequently if cash flow is tight or a large portion of receivables is at risk. Regular reviews make it easier to spot changes in payment behavior and address issues before they escalate.

How can I use an aging report to spot late-paying customers and cash flow risk?

You can use an aging report to identify late payers and cash flow issues by:

• Monitoring which customers regularly move into older aging buckets, such as 30+ or 60+ days overdue. 
• Segmenting by buyer size or industry to see where delays are concentrated.
• Tracking trends over time to determine whether payment behavior is improving or deteriorating.
• Reviewing and correcting repeat issues, such as invoice errors or approval delays, that may be causing payments to stall.
• Prioritizing collections strategies, such as automated reminders, early payment incentives or term adjustments, with high-risk accounts.