We Protect Your Corporate Heartbeat®

America's Commercial Collection Agency
3 Reasons for Slow Payers
Accounts Receivable Turnover
Aging Accounts Receivable
Collecting Commercial Debt
Collection Consultants
Commercial Collection Company
Commercial Debt Recovery
Contingency Debt Collection
Credit Industry Groups
Debt Recovery
Early Warning Signs
Professional Debt Collection
Small Business Debt Collection
Third Party Debt Collection
Types of Commercial Debtors
US Collection Agencies
Accounts Receivable Training
AR Outsourcing
Bad Debt
Business Collection Agency
Commercial AR
Commercial Debt
Consumer Debt
Credit Collection
Credit Risk Management
Credit Seminars
Debt Collection
International Debt Collection
Nationwide Debt Collection
Online Collection Services
Small Business
Accounts Receivable Consulting
Advertising and Media
B2B Debt Collection
Business Debt
Commercial Credit
Consumer Debt Collection
Credit Card
Equipment Rental
Foreign Debt
Industrial Supplies
Landlord Tenant Collections
Law Firms
Oil and Gas
10 Day Final Demand
AAB Free Rate Quote
Accounrts Receivable as an Asset
Accounts Receivable Analysis
AR Assignment
Canada Collections
Collection Agency FAQs
Credit Resources
Debt Collection Services
Free Consultation
National Debt Collection
Overseas Negotiations
Private Collection Agency
Request a Quote
Risk Mitigation
What is a Collection Agency?

Accounts Receivable Aging

Aging of accounts receivable is easy to organize and follow. There are several variations of accounts receivable aging but all are based on a very simple formula. The basic formula is the standard 30, 60 and 90 days aging of accounts receivable.

The age of your accounts receivable is a good indicator of the efficiency of your company accounts receivable. It is also gives you a good indication of which customers require collection attention. DSO or Days Outstanding is also a good overall barometer for the aging of accounts receivable.

Standard aging of accounts receivable

The most common method for accounts receivable aging is simply to list accounts according to the amount outstanding and how long an account is overdue. Accounts are divided into 30, 60, 90, 120 and 180 days outstanding. This report is called an Aged Trial Balance or ATB, which is simply a list of accounts broken down from the aging of accounts receivable.

Once an account hits 6 months or 180 days it should be written off. Most companies get real serious about collecting their receivables once an account is over 60 days.

In some industries like the food industry, the aging of accounts receivable is done in weeks not months. In the case of the food industry most invoices are due and payable in a week. Different industries will use variations of aging in accounts receivable.

Formula for Days Outstanding or DSO

This formula expresses the overall average time, in days, that are outstanding for your accounts receivable. This formula determines if a change in your receivables is due to a change in sales, or to another factor such as a change in selling terms. A credit analyst might compare the days' sales outstanding with the company's credit terms as an indication of how efficiently the company manages its aging of accounts receivable.

The formula is simple:

Ending Total Receivables x Number of Days in Period Analyzed
Credit Sales for Period Analyzed

Aging of Accounts Receivable and triggers

Most companies will set different trigger points according to the aging of accounts receivable. Some companies will automatically list an account with a collection agency when it hits 90 days. Every industry and company should have a plan of action or trigger at each stage of delinquency.

There are other methods and formulas for gauging the effectiveness of a company’s accounts receivable
. For more information give us a call or schedule a free consultation on aging of accounts receivable.
Free Rate Quote
Account Adjustment Bureau, Inc. BBB Business Review
Member of International Association of Commercial Collectors
ACA InternationalInsured for your Protection
Serving you since 1973