Aged Debtors Report: Track Overdue Invoices & Reduce Bad Debt
Alexandre (Finance Director @ Upflow)
20 Dec 2024
Aged debtors are customers who owe your business money for goods or services provided on credit. When invoices remain unpaid for an extended period, they can create cash flow challenges, making it harder to cover expenses or invest in growth.
That’s where an Aged Debtors Report comes in. This essential financial tool categorises outstanding invoices based on how long they’ve been overdue, helping businesses track late payments and manage their accounts receivable effectively. Keep reading to find out:
Need help calculating your aged debtors? Click on the banner below to calculate your aged debtors and other key accounts receivable metrics.
What is an Aged Debtor Report?
An Aged Debtors Report shows how long outstanding invoices have remained unpaid and is a crucial tool for managing cash flow. It categorises overdue invoices based on the length of time they have been outstanding, typically in 30-day intervals (e.g., 0-30 days, 31-60 days, etc.).
Also referred to as an Aged Receivables Report, this document lists all unpaid invoices along with customer details, amounts due, and the duration of the overdue payments. By reviewing an Aged Debtors Report, businesses can assess the health of their receivables, identify overdue accounts, and prioritise credit control efforts.
Why Are Aged Debtors Reports Important?
No business wants to provide its products or services without being paid. That’s why it’s crucial to keep track of outstanding invoices—whether you allow customers to pay in instalments or delay payment until an agreed due date.
Late payments can seriously impact cash flow. A 2023 survey from Atradius found that overdue payments now account for 49% of all B2B sales, with businesses waiting an average of 73 days to receive payment. Bad debts also remain a concern, representing 6% of all B2B invoiced sales.
An Aged Debtors Report provides a clear overview of unpaid invoices, helping businesses manage outstanding payments effectively. At a glance, you can see which invoices require urgent follow-up and which accounts may need closer monitoring. Many companies use financial management software to streamline this process.
Failing to track overdue invoices can lead to missed payments, strained customer relationships, and an inaccurate picture of financial health. Here’s how an Aged Debtors Report can help:
Assess the effectiveness of credit terms and collection processes
Identify inconsistencies in payment collection
Prevent cash flow shortages
Spot customers who regularly pay late and take appropriate action
Decide whether to pause services or deliveries until outstanding invoices are settled (hopefully without needing to escalate to debt recovery)
Analyse customer payment patterns and adjust invoicing timelines to encourage prompt payments
The Method for Ageing Debtors
Creating an Aged Debtors Report is straightforward. You simply need details of all outstanding invoices, which can then be organised according to their ageing schedule.
An ageing schedule is a breakdown of all unpaid invoices, categorised into date ranges—typically in 30-day intervals (e.g., 1–30 days, 31–60 days, 61–90 days, and so on).
You may also wish to include a column for current invoices that are not yet due. This allows you to be more proactive in your credit control efforts by sending reminders before payments become overdue.
Steps to Create an Aged Debtors Report
Review all outstanding invoices
Group invoices by customer to see how many unpaid invoices each client has and their respective due dates
Sort invoices into ageing categories based on how long they have remained unpaid
Order customers by total outstanding amount and overdue duration to prioritise collections
By categorising overdue invoices in this way, you can quickly identify the longest-outstanding payments that require immediate action.
Looking for an easier way to calculate your key AR metrics? Download our free spreadsheet!
Automating Aged Debtors Reports
The most efficient way to manage aged debtors is through automation, giving you instant access to outstanding payments and key financial data.
If you use an invoicing solution like QuickBooks, built-in aged debtors reports allow you to structure your invoice data in an intuitive, easy-to-understand format. You can configure the ageing schedule, apply search filters, and sort invoices to get a clear overview of outstanding payments.
We recommend setting up additional automated reports to track important financial KPIs, such as: Days Sales Outstanding (DSO), Ageing Balance, Cash Flow and Billing Cohorts
These insights will help you better understand the health of your cash collection process. You must consider using an accounts receivable management solution like Upflow for advanced aged debtors reports like this:
Benefits of an Aged Debtors Report
An Aged Debtors Report is a valuable tool for businesses, providing clear insights into outstanding payments and the financial health of your receivables. Here’s how you can make the most of it:
1. Estimate Bad Debt Risks
Some invoices become so overdue that they are unlikely to be collected, meaning they need to be written off as bad debt. There are several reasons why payments may become uncollectable—customers may be unable to pay, disputes may arise, or the company may have ceased trading. These unpaid invoices represent a financial loss that needs to be accounted for.
It’s essential to monitor bad debts each accounting period and assess their impact on your business. An Aged Debtors Report provides the data needed to track overdue invoices and estimate potential write-offs.
Additionally, reviewing bad debt trends can help you refine your credit policies. By analysing customer payment history and overdue amounts, you can adjust your risk assessment processes to prevent future losses. The longer an invoice remains unpaid, the lower the chances of collecting it—so a regular review of your aged debtors, supported by accounting software, is key to keeping bad debts under control.
2. Identify Cash Flow Issues
Ensuring your customers pay on time is crucial to maintaining a healthy cash flow. According to a study performed by Jessie Hagen from U.S. Bank, 82 percent of businesses fail due to poor management or understanding of cash flow.
Imagine receiving a large order from a client who doesn’t pay upfront. You secure funding to cover the production costs, but if the client delays payment, interest charges on your borrowing could erode your profits—even if they eventually pay.
An Aged Debtors Report helps you monitor overdue payments and spot potential cash flow risks before they become serious problems. It provides visibility into outstanding invoices so you can take proactive steps to follow up and keep your business financially stable.
Are late payments affecting your cash flow? Download our free guide for tips on getting paid faster.
3. Improve Your Credit Control Processes
Sometimes, late payments happen simply because a customer’s payment cycle doesn’t align with your invoicing schedule. In such cases, small adjustments—such as changing the invoice due date or sending reminders at the right time—can reduce delays.
However, if multiple invoices are overdue beyond 60 or 90 days, it may indicate weaknesses in your credit control process. An Aged Debtors Report helps identify patterns in late payments so you can strengthen your collections strategy.
Ways to improve your accounts receivable process include:
Prioritising collection efforts based on overdue amounts
Sending payment reminders as soon as invoices become overdue
Engaging with customers directly to resolve disputes and encourage prompt payments
Want to optimise your collections strategy? Check out our 8 best practices for managing accounts receivable.
4. Assess Your Credit Policies
An Aged Debtors Report is an effective way to evaluate your credit policies. If overdue invoices are concentrated among a small number of customers, it may indicate a problem with those specific accounts, requiring tailored collection efforts.
However, if late payments are widespread, it could suggest that your credit terms are too lenient. In this case, reviewing industry standards and tightening your credit policy may help reduce the risk of overdue payments.
5. Improve Inventory Management
Aged debtors data can also help with inventory planning. If unpaid invoices suggest a slowdown in customer demand, you can adjust stock levels accordingly—avoiding excess inventory or unnecessary storage costs. Conversely, identifying periods of high sales but slow payments can help you manage discounts and promotions effectively.
By using your Aged Debtors Report to track customer purchasing and payment behaviours, you can refine your stock management strategy, reducing costs and improving cash flow.
Want deeper insights into your receivables and financial health? Try Upflow for free today!
