About The Accounts Receivable Aging Report
There has recently been an increased emphasis place on the Accounts Receivable Aging Report recently. One of the keys to any successful accounts receivable management program is to provide periodic reports that show the aging process for outstanding invoices.
These invoices are usually issued to customers for goods and services bought on credit. The process of accounts receivable aging is how these reports are compiled in an organization. Below are reasons why the Accounts Receivable Aging Report is important and how being informed on the outstanding receivable balance at any given time is critical to the financial well being of a corporation or organization.
For example, if your company bills clients on thirty-day terms, but the largest clients consistently pay closer to forty-five days, it is a smart move to secure payment terms to your vendors that reflect their business realities. Failure to know the difference between the desired term of payment and the average payment range used by most of your customers will result in a company strapped for operating capital, because it has made promises that it cannot keep within an acceptable time frame. This will negatively impact your relationship with your suppliers, broker, construction, or trucking service providers; which will in turn impact your ability to operate and serve your client base.
The Accounts Receivable Aging Report is a valuable tool when it comes to strengthening ties with your clients. If a periodic report shows that a regular customer has an outstanding invoice of over ninety days, but has not even paid invoices sent thirty days ago, that is an opportunity to contact the customer and ask about the status of the invoice. Quite often, the invoice may have simply been misplaced and the payment can be received immediately once the issue has been brought to their attention. Accounts Receivable Aging Report can also help indicate when it may be time to end a relationship with a customer. If the Accounts Receivable Aging Report consistently shows that the client is having trouble paying invoices in a timely manner, it may be time to look into the financial health of that company. Many companies use accounts receivable aging to determine if some sort of investigation is necessary. For example, a client who consistently has invoices falling into the ninety to one hundred twenty day period before payments are made may be approaching bankruptcy or about to close. The Accounts Receivable Aging Report is a valuable part of building a structure for an operating budget. Understanding the existing payment habits of customers and synchronizing that with the need for a steady revenue stream into the company helps to ensure that the organization will have funds in hand by a given date to take care of operating costs.
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