What is an AR aging?

An accounts receivable (AR) aging is a report that lists unpaid customer invoices grouped by how long they have been outstanding, typically current, 1 to 30, 31 to 60, 61 to 90 and over 90 days past due. It shows who owes the business money and how late they are.

How it is used

  • Collections: who to call this week, starting with the oldest and largest balances.
  • Cash forecasting: placing each invoice in the week the customer is likely to pay.
  • Bad debts: old balances are the first candidates for an allowance or write-off.
  • Lending: many lenders base a credit line on receivables and leave out invoices past a set age.

Most accounting software can age invoices by due date or by invoice date. Check which one a report uses before comparing it with another.

Worked example

CustomerCurrent1-3031-6061-9090+Total
Customer A$25,000$5,000$0$0$0$30,000
Customer B$13,000$7,000$0$0$0$20,000
Customer C$2,000$0$5,000$2,000$1,000$10,000
Total$40,000$12,000$5,000$2,000$1,000$60,000

$8,000 of the $60,000 is over 30 days past due, and all of it is Customer C. One phone call covers the whole collection problem.

Common mistakes

  • A total that doesn't match the balance sheet. The aging total should equal accounts receivable on the same date.
  • Unapplied payments and credits. They leave old invoices open and make customers look later than they are.
  • Mixing aging methods between months or between clients.
  • Ignoring concentration. Two customers owing 83% of receivables is a risk even if both are current.

Related terms

  • Days sales outstanding (DSO): Days sales outstanding (DSO) is the average number of days it takes a business to collect payment after a sale.
  • AP aging (accounts payable aging): An accounts payable (AP) aging is a report that lists unpaid supplier bills grouped by how long they have been outstanding or how soon they are due.
  • 13-week cash flow forecast: A 13-week cash flow forecast is a week-by-week projection of the cash coming in and going out of a business over the next quarter, starting from today's bank balance.

Further reading