As a business owner, you might have come across the terms 'aged debt' or 'aged debtors report'. If you are wondering what this refers to, keep reading for our guide to what an aged debtors report is, examples, and why it is useful.
What is an Aged Debtors Report
Before understanding what an aged debtors report entails, it is crucial to look at the concept of aged debt itself. Aged debt refers to a measurement of the total amount of money owed to your business by customers. This can help you understand your business's financial health. An aged debtors report is a complete list of all outstanding sales invoices, minus any credit notes that have been issued to your customers, and not yet refunded. These reports are typically sorted by customer, product type, and date. If your company is registered for VAT, the report will show invoices and credit notes inclusive of VAT as this is the full amount of money your business is due to receive. You can also look at any invoices that are past their due date to chase them up with your customers.
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What data is included in an Aged Debtors Report
- Invoice amounts (how much each customer owes)
- What client owes your business the most money
- How long each client has owed the money for
- Each client's credit
- Expected payment date
- Info about credit notes issued to customers
- Any relevant tax information associated with invoices
Why is an Aged Debtors Report important?
Aged debtors reports provide you with an excellent insight into your company money and the financial health of your business. You can get an understanding of average payment times, and any customers unlikely to complete their payments. If you have recently implemented changes in your accounts receivable process, you can use your aged debtor report to evaluate the success of those changes.
Keeping aged debt in your business under control will improve your financial health - if liabilities are kept low, your business is set up to be in a good financial position going forward.
Aged Debtors Report Examples & Templates
There are several comprehensive templates for aged debtor reports available online. See below for a simple example of an aged debtor report format:
How to manage Aged Debtors
- View your aged debtors report regularly: Keep as up-to-date as possible with outstanding debts and late payments and chase up customers.
- Prioritize key debts: Regularly review the size of the debts, by invoice, customer and due date, and rank them in order of priority.
- Have a credit policy and terms of trade in place: Establish clear terms of trade to minimise and prevent bad debts. Develop clear written guidance on your terms and the credit limits and ensure that customers sign acceptance of your terms.
- Implement strong accounts receivable processes: Having robust accounts receivables processes can help your company to avoid longstanding debts. Ensure your company has a robust payment collections process in place, with set timescales for the various stages of communication (letters, emails and phone calls). This process should be mapped clearly and understood by all of your employees and can be automated.
- Bad debt provisioning: It can be useful for businesses to use credit insurance products and debt recovery services to manage the risk and effects of bad debts. Unfortunately, this may sometimes entail sending professional demand letters or taking legal action. Ensure there are provisions for bad debts in your annual or ongoing budgeting process. If these are exceeded by your debtors, act swiftly.
How does managing debt help cash flow in your company?
Successfully managing cash flow in your business is ensuring the amount of money coming in is greater than the amount going out. Of course, when debt is managed well, more money will come in quicker. It can be useful to have a credit control function in your business to review aged debts, track outstanding payments, and proactively chase clients for payment.
Aged Debtors Report FAQs
- Where would you file an aged debtors report?
There are several comprehensive templates for aged debtor reports available online. You can get aged debtors information from Futrli Flow.
- Why are aged debtors an issue?
Aged debt is a measurement of the total amount of money owed to your business by customers. Consequently, if you have too many aged debtors or their debt is not paid for a significant amount of time, this can cause issues with cash flow.
- What is a debtor?
Debtor refers to anyone who owes your business money.