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What is debtor aging?

  • Account receivable aging often serves as a record to show the outstanding balances of customers along with the time bucket.
  • It helps the businesses to identify slow payment customers
  • Aging report will list out the unpaid balances by categorized into the time frame such as: Current, 30 days, 90 days, 120 days and more


Purpose of aging report

  • To monitor the status of their accounts receivables.
  • To identify long outstanding customers by referring to the date range.
  • To determine slow repayment customers and those balances which exceeding the credit terms granted to customers.
  • Showing the Company’s ability for collection
  • Indicates customers’ credit risk
  • To estimate potential bad debts and allowance for doubtful debts
  • Reflect the Company’s cash flow situation


Why the aging report is important?

  • The Company able to well track the collection from customers
  • If the amount was due, it indicates poor collection efforts or poor quality of debts
  • For those more than one year outstanding balance, the Company should assess whether the amount is still collectible
  • It further reflects the Company’s cash flow position
  • The aging method allow the company to target for those customers who required follow-up procedures for payments


How to manage late payment?

  • Implement late payment charges, e.g. charge interest on overdue amount
  • Providing discount or incentives for those earlier payment
  • Consider automate follow-up process to schedule reminder emails