Accounts receivable aging schedule
Definition
An accounts receivable aging schedule is a report that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding. It helps businesses identify overdue payments and manage credit risk.
5 Must Know Facts For Your Next Test
- The aging schedule is typically divided into intervals such as 0-30 days, 31-60 days, 61-90 days, and over 90 days.
- It assists in assessing the effectiveness of a company’s credit and collection policies.
- A higher proportion of receivables in older age categories may indicate potential cash flow problems.
- The aging schedule aids in identifying specific delinquent customers for follow-up actions.
- It is an essential tool for financial planning and maintaining adequate working capital levels.
Review Questions
- What are the typical time intervals used in an accounts receivable aging schedule?
- How can an accounts receivable aging schedule help in managing credit risk?
- Why is it important to monitor the proportion of receivables in older age categories?
"Accounts receivable aging schedule" appears in:
Study guides (1)
Related terms
Trade Credit: The agreement between businesses to buy goods or services on account, paying the supplier at a later date.
Working Capital: The difference between a company’s current assets and current liabilities, used to measure its short-term financial health.
Receivables Turnover Ratio: A financial metric that measures how efficiently a company collects its accounts receivable.
