Consumers, and in turn businesses, are spending more than ever. While the economy is on an upswing, many organizations are still pulling themselves out of the business challenges they faced over the last two years. While sales numbers continue to be positive, now is more important than ever to keep an eye on the all-important cash flow. Knowing what cash has come in, how much is outstanding and who owns those longest outstanding invoices is key to success now and in years to come. The best way to gain these key insights is to develop an AR Aging Report.
What is an AR Aging Report?
Accounts receivable aging provides companies the ability to differentiate open invoices based on time. In this vein, AR Aging Reports sort and organize your organization’s outstanding accounts receivable by time, usually in 15 or 30-day segments. Aging reports are used to determine the financial health of your and your customers’ finances.
The best way to manage your outstanding invoices and understand which customers have the longest outstanding dept is by using an accounts receivable aging report. These reports can give your collections team keen insight into your books, while keeping records organized and your team on track. Those that are the longest outstanding, get the first call. Many collections departments use accounts receivable aging reports as their go to reference for all their customers and open invoices.
How Does the Aging Report Work?
An aging report can be customized and tailored to each company’s specific needs. Typically, an aging report will include:
- The customer name
- The outstanding amount
- Days late based on invoice
To make the aging report more useful, companies will often color code by age to more easily show which invoices are latest. You many even keep the company’s contact information in the aging report so you can simply make calls or track activities directly from the aging report.
Why Is It Important?
An accounts receivable aging report keeps track of all your outstanding invoices. Cash flow is one of the most important assets in a company, and if you’re not aware of where that outstanding cash is then you’re likely to never receive it. Keeping track of your outstanding invoices means you are also keeping track of your business’ money.
AR aging reports can also be an indicator of an economic downswing. If AR aging shows a company’s receivables are being collected slower than normal, this can be warning that business may be slowing down or that the company is taking greater credit risk in its sales practices.
How Do You Maintain an Aging Report?
The most popular way to maintain an accounts receivable aging report is by using Excel. AR teams are intimately familiar with the ins and outs of spreadsheets given the myriad of other reports developed by these teams. While creating an aging report in Excel, is one strategy, the program is deeply flawed. The formulas you must use to create an aging report can be complicated. If you’re not particularly Excel savvy, you could end up with errors and miscalculations that can cost your organization time and money.
Automation is the Key to AR Reporting Success!
AR automation can reduce complications, while improving efficiency and cash flow throughout your organization. Having insights into AR aging at the touch of a button, allows your teams to gain key insights quickly. In fact, this saved time can help businesses improve efficiency by up to 80%, and can earn a return on investment of up to 366%.
Automating the most manual and time-consuming processes in your work will carry massive benefits. Automation tools, like award-winning Lockstep, connect to your current business software and runs the numbers for you. All of your contact notes in the accounts receivable software, so you’re never flipping back and forth between systems, and everything is in one place. Accounts receivable software is helpful for maintaining aging reports and can do a lot more.
With a connected accounting solution, like award-winning Lockstep Receivables, for your finance team to coordinate work with customers and vendors, you can go digital and enjoy the benefits of office automation.