An aging report answers two questions: who owes you money, and how late are they.
An AR aging report groups open invoices by how long they have been outstanding: current, 1–30, 31–60, 61–90 and 90+ days. It drives collections, credit policy and your allowance for doubtful accounts.
Reading it
Each row shows the customer, the invoice and the balance in its age bucket. The bucket totals tell you whether a collections problem sits with one account or runs across the whole book.
Compare month to month. A 90+ bucket that keeps growing means your process has slipped, or a customer is in trouble.
Who to chase first
Start with large balances about to cross into a later bucket. Automated reminders handle the early buckets. Strategic accounts and long-overdue balances need a person.
Keep collection notes in the CRM or billing system, so a handover between finance and the account team does not lose the thread.
- Automated reminders at 7, 14 and 30 days past due
- A credit hold for repeat late payers
- A payment plan for customers who are struggling but viable
- An escalation path for disputes and legal risk
Setting the reserve
GAAP generally requires an estimate of what you will not collect. Applying a percentage to each age bucket, rising with age, is the simplest defensible method.
Write off a specific invoice once collection is exhausted, and adjust the allowance to match.
The numbers around it
Days sales outstanding measures how fast you collect relative to revenue. Cutting DSO releases cash without selling anything more.
Track disputes and invoice accuracy too. A good share of late payments start as a billing error.
Written by the team at Ambivo, a business platform that keeps CRM, accounting and ERP on one customer record. This article is general guidance on the topic rather than a description of Ambivo features.