What Is an Aged Debtors Report?
Some of the terminology involved in accounting can be confusing. The term debtor is simple enough  it refers to anyone who owes your business money. If youve heard the aforementioned term and cant quite figure out what it means or what its relevance is to your business, were here to help. Learn more about the importance of aged debtors reports with our comprehensive guide, kicking off with our aged debt definition. Understanding aged debtors reports  Before we get onto the meaning of aged debtors reports, its essential to understand the definition of aged debt. Essentially, aged debt is a measurement of the total amount of money owed to your business by customers. Consequently, an aged debtors report is a complete list of all the invoices that havent yet been paid, minus any credit notes that have been issued to your customers, and not yet refunded. Generally speaking, aged debtors reports are sorted by customer, product type, and date. Furthermore, if youre registered for VAT, the report should show invoices/credit notes inclusive of VAT, since thats the full amount of money that you can expect to receive. To make things easier, your aged debtors report should be divided into different periods, i.e., invoices due to be paid in 30 days, in 30 to 60 days, in 60 to 90 days, and so on. Aged debtors reports are essential because they provide an excellent insight into your businesss financial health. You can use the data contained within the report to understand how quickly, on average, your customers make a payment, the effectiveness of any changes to your accounts receivable/debtor management process, the number of bad debtors (i.e., customers who are unlikely to ever make payment), and whether any particular types of customers are more likely to be late payers. Aged debtors report template  To get a better sense of how these sorts of reports work, it may help see an aged debtors report example. Below, youll find a simple aged debtors report template:  Current 1-30 days 31-60 days 61-90 days >90 days Total Company A 1000 1400 1000 - - 3400 Company B 500 300 - 400 - 1200 Company C 800 700 - 200 1000 2700 Total 2300 2400 1000 600 1000 7300  Its worth remembering that this aged debtors report example is very straightforward, so if youre looking for a template to use for your own business, its probably a good idea to search online for a more comprehensive document. There is a broad range of aged debtors report templates to choose from, so you should be able to find one thats well suited to your business. Improving your debt management process  Once youve compiled an aged debtors report, you may wish to take a more proactive approach to the amount of debt on your companys balance sheet. After all, that capital could be used for a wide range of initiatives, including funding new projects and paying out dividends. Think about prioritising your largest debts and putting more effort into chasing up chronically late payers. You should also consider automating your accounts receivable process to reduce the legwork required by your accounting team. To stop aged debt from becoming such a significant problem, enforcing stricter payment terms and tightening up your credit policy could also be an effective ploy. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.