Businesses need to grow. And, for the proper growth of your business- it is crucial to know the status of your business’s financial stability.
Some business owners determine their business’s financial stability with the help of financial reports generated using online accounting software, whereas some businesses have a manual bookkeeping system to check the business finances and status.
Accounts receivable aging report is a crucial business report for determining the financial stability of your business. It is also known as invoice aging report.
What is accounts receivable aging report?
Accounts Receivable (AR) Report refers to the list of unpaid invoices of the clients and customers with periodic date slots. Popularly known as the ‘invoice aging’ report, it helps determine the final status of the invoices due for receipt.
So, what details does the AR aging report contain?
The accounts receivable aging report basically displays the list of due invoices. Depending upon your business accounting, you can learn the outstanding invoice amount to settle the accounts on time.
There are several reasons to use accounts receivable reports in business accounting. The best accounting software for small businesses has an exclusive report feature in the business reports category, including AR and AP reports. We shall discuss the same further.
What is the importance of accounts receivable aging report?
While a business owner, a startup owner, or a freelancer is working hard to sell the product or service, there must be a proper and systematic approach to understand the invoices due for payment. How can a business run smoothly without receiving payments from the clients or customers on time?
Businesses, therefore, integrate their accounting data using online accounting software. The software generates all types of financial and business reports, including accounts receivable aging reports, accounts payable reports, purchase order reports, sales reports, profit, and loss statements, etc.
Let’s discuss the crucial benefits of generating an invoice aging report
1. Assessing the figures of bad debts
Bad debt is an uncollectible account. There has to be a proper approach, structure, or policy to recover the bad debts because any business cannot run efficiently if there are issues in collecting payments from the customers or clients on time.
With the help of an accounts receivable aging report, the accounts department can get the correct figures of the debts and bad debts of the particular customers with periodic date ranges. Hence, it becomes easy for the accounts team to inform the head of the department to take strict actions to get the due invoices paid.
2. Understanding or revising the credit policies of the business
Every business has a mentioned credit policy or credit terms for collecting payments from the customers or the clients. It describes both the period granted for payment and the collection process.
While using the best accounting software for businesses, you can download an invoice aging report that helps list customers’ names and their invoices due for payment. If the list of the payments exceeds your debt ratio, then there arises a need to revise the existing credit policy.
Hence, an accounts receivable aging report helps businesses understand their existing credit policy and decide to revise it.
3. Quickening the payment collection process
One of the ultimate benefits of getting an invoice aging report is to quicken the payment collection process. Every business owner wants their invoices to get paid on time. But, how will you do that?
One of the best ways to get your invoices paid on time is by getting the list of invoices due for payment and sending timely reminders to the clients. With the help of the invoice aging report, businesses can quicken their payment collection process.
4. Analyzing the late-paying customer trends
Another benefit of downloading or viewing the invoicing aging report is that it helps businesses get the list of late-paying customers. Some customers are regular in delaying the payment process, which can be easily identified with the help of an accounts receivable aging report.
So, using an AR aging report- the business owner can quickly analyze the trend of late-paying customers and revise their credit policy accordingly.
Steps to prepare an AR or invoice aging report?
Well, accounts receivable aging report is easily generated with Moon Invoice, online accounting software for small businesses. Below is a quick and easy procedure for generating a quick invoice aging report online.
- Login to Moon Invoice
- Click on Reports > Invoice Aging Report
- Click on View, Download, or Print to Generate the report
Right after you have generated the accounts receivable aging report using the best accounting software for businesses, you will be able to identify the list of customers that haven’t paid for the invoices raised to them. Later, you can use the data and late-paying customer trends for simplifying the payment collection process.
Invoice aging report example
Understanding the invoice aging schedule
While generating an invoice aging report for your business, you must get a quick glimpse of the aging schedule. The invoice aging schedule refers to the specific or periodic date range for the accounts received or to be received.
Start managing your business’s cash flow efficiently
The accounts receivable aging report helps your business better manage cash flow. It helps you identify the late paying customers as per your mentioned credit policy and helps to analyze the trends of your business’s incoming cash flow.
Get Moon Invoice online accounting software to generate invoice aging reports from 0-90 days and beyond. Also, you can alter your invoice aging schedule as per your business’s credit policy with the Moon Invoice app. Connect with our sales and support team for more information on managing your business accounts using Moon Invoice reports.