How to read an accounts receivable aging report
An aging report is the single most useful view of the money your trade buyers owe you. Here is how to read one and act on it.
In short
- An aging report lists every unpaid invoice by how many days past due it is: current, 1-30, 31-60, 61-90 and over 90.
- Read the totals first for the health of the book, then the rows for who is causing it.
- Track two ratios: the share of the book that is late, and how concentrated the late money is.
- Each bucket has a standard response, from a reminder to formal recovery.
The buckets
Every unpaid invoice goes into a column by how many days it is past its due date: current (not yet due), 1-30, 31-60, 61-90 and over 90 days. Each buyer is a row, and the bottom row totals each column.
In this example, most of the late money sits with one buyer, and one small account has an invoice more than 90 days late.
| Buyer | Current | 1-30 | 31-60 | 61-90 | 90+ |
|---|---|---|---|---|---|
| Harbour and Pine | $9,260 | $8,420 | $9,960 | $12,480 | |
| Northgate Deli Co | $3,150 | ||||
| Lune Street Salons | $1,880 | $2,240 | |||
| Copper Kettle Cafes | $4,610 | ||||
| Total | $14,290 | $10,660 | $9,960 | $12,480 | $4,610 |
How to read it in two minutes
Start at the bottom. The totals row tells you the size of the book and how much of it is late. Here, $52,000 is outstanding and $37,710 of it is past due. That ratio, 73 percent, is the headline: in a healthy wholesale book it is usually under 25 percent.
Then read down the right-hand columns. Anything in 61-90 or 90+ is the money most at risk, and the names beside it are the people to deal with this week. Here that is Harbour and Pine with $12,480 at 61-90 and Copper Kettle with $4,610 past 90.
Finally, scan the rows. A buyer with money spread across several late columns is paying slower every month; a buyer with one old invoice and nothing else is usually a dispute or a mistake. The two need different phone calls.
What each bucket tells you
| Bucket | What it usually means | What to do |
|---|---|---|
| Current | Normal trade credit | Nothing, beyond a reminder before the due date |
| 1-30 | Forgotten or slow payment | Reminders by email and text, collect from saved card |
| 31-60 | A real problem is forming | Hold new orders, phone the buyer |
| 61-90 | Serious risk | Final notice, agree a payment plan, add statutory interest where it applies |
| 90+ | Likely bad debt | Formal recovery; consider whether to keep trading |
Worked example
The two ratios, worked
Share of the book that is late. Past due divided by total outstanding: $37,710 ÷ $52,000 = 73 percent. If that figure grows month on month, the collection process is not keeping up with the selling.
Concentration. The largest late balance divided by all late money: $30,860 ÷ $37,710 = 82 percent. Here the risk is one buyer, Harbour and Pine. Lower their limit, hold their orders and the whole report changes. If instead the late money were spread across twenty small accounts, the fix would be the reminder schedule, not any one conversation.
| Total outstanding | $52,000 |
|---|---|
| Past due | $37,710 |
| Share late | 73% |
| Largest late balance | $30,860 |
| Concentration | 82% |
Aging by due date, not by invoice date
Some reports age invoices from the invoice date, so a Net 30 invoice shows as 30 days old on its due date. That makes every buyer look late. Age from the due date instead: an invoice is current until the day it falls due and enters the 1-30 bucket the day after. Terms Due ages by the due date Shopify assigned to the order, so a Net 60 buyer who pays on day 60 never appears late.
Using the report week to week
- Run it on the same day each week. Monday morning works, because the week's calls can be planned from it.
- Compare with last week's. The interesting accounts are the ones that moved right, not the ones that were always there.
- Act on the right-hand columns first, largest balance first.
- Use it before every limit change. A buyer asking for more credit should be clean on the report.
- Share it with whoever answers the phone. A buyer who orders while on the report should be asked about the balance.
Aging in a spreadsheet, and in Terms Due
Spreadsheet
- Built from an export, so already stale.
- Formulas for days late that break at month end.
- Payments marked in Shopify since the export are missed.
- Owned by one person and updated when they have time.
Terms Due
- Live from Shopify orders and payments.
- Same buckets every week, aged from the due date.
- Click a figure to see the invoices and reminders behind it.
- On screen, as CSV, or in a Monday email to the whole team.
Beyond the aging report
The aging report tells you where the money is today. Days sales outstanding tells you how long it takes to arrive on average, which is the number to track over months. Together they are most of what a credit controller looks at, and Terms Due builds both live from your Shopify orders. See the aging report feature.
Questions
How often should I run an aging report?
Weekly is ideal for a wholesale business. Terms Due can email it to you every Monday.
Is an aging report the same as a statement?
No. A statement is what you send one buyer. An aging report covers every buyer and is for you.
What is a good percentage of receivables past due?
It varies by trade, but under 25 percent of the book past due, with very little beyond 60 days, is healthy for a small wholesaler. The trend matters more than the number.
Should I include disputed invoices?
Yes, but mark them. A dispute still represents money you have not received; hiding it makes the book look better than it is.
Can my accountant use the export?
Yes. The CSV has one row per invoice with the buyer, order number, due date, days late and amount outstanding, which reconciles against any ledger.
Related
Aging report
A live accounts receivable aging report for Shopify B2B: every open invoice in current, 1-30, 31-60, 61-90 and 90+ day buckets, by buyer, with CSV export.
Read moreChasing unpaid invoices
A practical process for chasing unpaid B2B invoices: timing, tone, channels, when to stop supplying, and reminder wording you can copy.
Read moreDays sales outstanding (DSO)
What days sales outstanding measures, the formula with a worked example, what a good DSO looks like against your terms, and the five changes that bring it down.
Read moreStop chasing wholesale invoices by hand
Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.
Install on Shopify