Accounts Receivable Aging is a report that categorizes a company’s accounts receivable (AR) based on the length of time the invoices or bills have been outstanding. This report provides a snapshot of the company’s receivables portfolio, allowing management to assess the creditworthiness of customers and identify potential issues with late payments or uncollectible amounts.

The aging of accounts receivable is typically divided into various time buckets, often based on the number of days the invoices are past their due dates. Common aging categories may include:

1. **Current:** Invoices that are not yet due or are within the current payment period.

2. **1-30 Days:** Invoices that are 1 to 30 days past their due date.

3. **31-60 Days:** Invoices that are 31 to 60 days past their due date.

4. **61-90 Days:** Invoices that are 61 to 90 days past their due date.

5. **Over 90 Days:** Invoices that are more than 90 days past their due date.

Here’s how the process of creating an Accounts Receivable Aging report typically works:

1. **Gather Data:** Collect information on all outstanding invoices, including the invoice date, due date, and amount owed.

2. **Categorize Invoices:** Group the outstanding invoices into the aging categories based on the number of days past due.

3. **Calculate Total Receivables:** Sum the amounts within each aging category to determine the total accounts receivable for that category.

4. **Analyze and Interpret:** Review the Accounts Receivable Aging report to understand the distribution of receivables and identify trends. For example, a high concentration of invoices in the “Over 90 Days” category may signal potential collection issues.

5. **Take Action:** Based on the analysis, companies can take various actions, such as implementing more stringent credit policies, contacting customers with overdue invoices, or adjusting their allowance for doubtful accounts.

The Accounts Receivable Aging report is a valuable tool for managing cash flow, assessing the effectiveness of credit and collection policies, and identifying potential risks associated with late or uncollectible receivables. It is often used by finance and credit management teams to monitor the health of a company’s receivables portfolio and make informed decisions about credit terms and collection strategies.