Aged Debtors Report

What is an Aged Debtors Report?

A financial report that details the amount of money that the business is owed by its customers by grouping and sorting the amounts according to the number of days outstanding.

An aged debtors report provides an overview of the invoices your customers have been issued but have yet to pay. The following key data points are usually provided within this report:

• Invoices and total owed by customer
• Information grouped together by time outstanding, often on a 30, 60 or 90 day basis
• Information grouped together by customer and product type
• Allocation of different amounts by debtor classification: outstanding, overdue, doubtful or bad
• Information about credit notes issued to customers that have not
• It may also include relevant tax information associated with the invoices

Why is an Aged Debtors Report important for business today?

A detailed aged debtors report provides the following insights into the health of your business:

• An understanding of how quickly your customers are paying you on average
• An ability to compare the speed of customer payments relative to industry benchmarks
• An ability to track the effectiveness in detail of changing debtor management practices
• An analysis of the proportion of your debtors who are unlikely to ever pay you
• An understanding of whether particular types of customers are more likely to be late payers relative to others

Why is an Aged Debtors Report important for an event tomorrow?

Potential investors in any transaction will be keen to understand how the business ensures revenue earned is converted into cash flow into the business as soon as possible. An aged debtors report is invaluable during financial due diligence as it provides detail of:

• How long it takes your business to generate cash from your business
• What proportion of your customers end up being bad or doubtful debtors

This information can then be combined with other inputs to help determine:

• How the business compares to other similar companies in converting revenue into cash
• How quickly any new growth initiative will not only increase revenue but more importantly increase the flow of cash into the business

Pros of addressing Aged Debtors Reports

• Tracking debtor payment performance
• Compare against industry benchmarks
• Determine the types of customers or products need most attention

Cons of not addressing this topic

• Inability to compare debtor payment timing against industry benchmarks
• Inability to make informed decisions on debtor management
• Inability to track the impact of any changes to debtor management