The Accounts Receivable Aging Report: How to Read and Analyze It

You pull your aging report. You see numbers in columns: Current, 1-30, 31-60, 61-90, 90+. But what do they mean? Which numbers are problems? What should you do about them?

The accounts receivable aging report is the primary tool finance teams use daily. It shows who owes you money and how long it's been overdue. But reading it correctly—and knowing what to do with the information—is the difference between proactive cash flow management and reactive crisis management.

Here's how to read and analyze your aging report, identify risks, and create action plans for each stage.

What is an Aging Report? The Basics

An aging report groups your outstanding invoices by how long they've been outstanding. It shows:

• Which customers owe you money
• How much they owe
• How long each invoice has been outstanding
• Total amounts in each aging bucket

Why It Matters:

The aging report tells you:

• Who needs reminders: Invoices in 1-30 bucket need follow-up
• Who needs escalation: Invoices in 61-90+ buckets need immediate attention
• Cash flow risk: Older invoices are less likely to be collected
• Collection performance: Trends show if your process is working

Visualizing the Buckets: Understanding the Standard Aging Categories

Aging reports use standard "buckets" to group invoices by how long they've been outstanding. Most systems measure from the due date (for overdue invoices) or invoice date (for current invoices):

Important Note: Some systems use slightly different buckets (e.g., 0-30, 31-60, 61-90, 91-120, 120+) or measure from invoice date instead of due date. The concept is the same—group invoices by how long they've been outstanding. Check your specific system's methodology.

Example Aging Report:

Reading This Report:

• ABC Corp: $10,000 current (not due yet), $5,000 overdue 1-30 days. Needs follow-up on the $5,000.
• XYZ Inc: $8,000 overdue 31-60 days, $3,000 overdue 61-90 days, $2,000 overdue 90+ days. Problem client—needs immediate attention.
• DEF Ltd: $20,000 current (not due yet). No action needed.

Risk Identification: Spotting Problems in Your Aging Report

Not all aging reports are created equal. Some patterns indicate problems. Others are normal. Here's how to spot risks:

Risk Pattern 1: One Client Across Multiple Buckets

Example:

• Customer: XYZ Inc
• Current: $0
• 1-30 Days: $5,000
• 31-60 Days: $8,000
• 61-90 Days: $3,000
• 90+ Days: $2,000

What This Means:

This client has invoices in every bucket. This indicates:

• Chronic Late Payer: Consistently pays late
• Cash Flow Problems: Client may have financial issues
• Process Problems: Client's payment process is broken
• High Risk: Older invoices are less likely to be collected

Action Plan:

• Immediate Escalation: Contact client management
• Payment Plan: Consider payment plan for older invoices
• Credit Review: Review credit terms, consider tightening
• Collection Focus: Prioritize collection efforts on this client

Risk Pattern 2: Cluster in One Bucket

Example:

• Multiple clients with invoices in 31-60 Days bucket
• Few invoices in other buckets

What This Means:

This indicates a systemic issue:

• Process Problem: Your collection process isn't working
• Timing Issue: Something happened 31-60 days ago (seasonal, process change)
• Industry Issue: Industry-wide payment delays

Action Plan:

• Review Process: Identify what changed 31-60 days ago
• Improve Reminders: Strengthen reminder process for this stage
• Industry Analysis: Check if industry is experiencing delays
• Process Improvement: Fix underlying process issues

Risk Pattern 3: Growing 90+ Days Bucket

Example:

• 90+ Days bucket growing month over month
• Other buckets stable or shrinking

What This Means:

Bad debt risk increasing:

• Collection Failure: Process isn't working for old invoices
• Write-Off Risk: Older invoices are less likely to be collected
• Process Breakdown: Something is wrong with escalation process

Action Plan:

• Immediate Action: Focus collection efforts on 90+ days bucket
• Escalation: Consider collection agency or legal action
• Process Review: Fix escalation process to prevent invoices reaching 90+ days
• Write-Off Consideration: Evaluate which invoices are collectible

Risk Pattern 4: Healthy Distribution

Example:

• Most invoices in Current bucket
• Small amounts in 1-30 Days
• Minimal amounts in older buckets

What This Means:

Healthy receivables:

• Good Process: Collection process is working
• Timely Payment: Most clients pay on time
• Low Risk: Minimal bad debt risk

Action Plan:

• Maintain Process: Keep doing what you're doing
• Monitor Trends: Watch for changes in distribution
• Optimize: Look for opportunities to improve further

Action Plan per Bucket: What to Do at Each Stage

Current (0-30 Days):

What It Means:

• Invoices not yet due or recently due
• Normal, healthy receivables

Action Required:

• Monitor: Keep an eye on these invoices
• Pre-Due Reminders: Send reminders 3-5 days before due date
• No Escalation: No action needed unless invoice becomes overdue

1-30 Days Overdue:

What It Means:

• Invoices 1-30 days overdue
• Minor delays, usually administrative

Action Required:

• Friendly Reminders: Send email reminders
• Verify Paperwork: Ensure invoice and paperwork are correct
• Follow-Up: Check if payment is in process
• No Escalation: Keep reminders friendly and professional

31-60 Days Overdue:

What It Means:

• Invoices 31-60 days overdue
• Moderate delays, may indicate problems

Action Required:

• Firm Reminders: Send firm but professional reminders
• Phone Calls: Consider phone calls for high-value invoices
• Payment Arrangements: Discuss payment plans if needed
• Escalation: Escalate to account manager or management if no response

61-90 Days Overdue:

What It Means:

• Invoices 61-90 days overdue
• Significant delays, high risk

Action Required:

• Immediate Escalation: Contact client management directly
• Payment Plans: Offer payment plans for collectible invoices
• Documentation: Document all communication
• Consider Suspension: Consider suspending services or shipments
• Legal Consideration: Evaluate if legal action is needed

90+ Days Overdue:

What It Means:

• Invoices 90+ days overdue
• Very high risk, likely bad debt

Action Required:

• Final Notice: Send final notice with consequences
• Collection Agency: Consider engaging collection agency
• Legal Action: Evaluate legal action for high-value invoices
• Write-Off: Consider writing off uncollectible invoices
• Credit Review: Review credit terms, consider tightening

Reading the Totals: Understanding Overall Health

Total Receivables:

The bottom row shows total receivables by bucket. This tells you:

• Overall Health: How much is in each aging stage
• Risk Distribution: Where your risk is concentrated
• Trends: Compare month-over-month to see if improving or worsening

Example:

Reading This:

• Current increased: More invoices not yet due (could be good—more sales, or bad—slower collection)
• 1-30 Days decreased: Fewer invoices overdue 1-30 days (good—process improving)
• 31-60 Days decreased: Fewer invoices overdue 31-60 days (good—process improving)
• 61-90 Days decreased: Fewer invoices overdue 61-90 days (good—process improving)
• 90+ Days decreased: Fewer invoices overdue 90+ days (good—process improving)
• Total decreased: Overall receivables decreased (good—collecting faster)

Overall Assessment: Process is improving. Fewer invoices in older buckets, total receivables decreasing.

Common Aging Report Mistakes

Mistake 1: Ignoring the Report

Don't pull the report and ignore it. Review it regularly (weekly or monthly) and take action.

Mistake 2: Focusing Only on Totals

Don't just look at totals. Drill down into individual customers and invoices to identify problems.

Mistake 3: Not Tracking Trends

A single report is a snapshot. Track trends over time to see if you're improving or getting worse.

Mistake 4: No Action Plan

Don't pull the report without an action plan. Identify problems, create action plans, execute them.

Mistake 5: Ignoring Older Buckets

Don't ignore 90+ days bucket. These invoices are high risk and need immediate attention.

Using Aging Reports for Cash Flow Forecasting

Aging reports help forecast cash flow:

Expected Collections:

• Current: Expect payment within 30 days
• 1-30 Days: Expect payment within 30-60 days
• 31-60 Days: Expect payment within 60-90 days (if collectible)
• 61-90 Days: Expect payment within 90-120 days (if collectible)
• 90+ Days: Low probability of collection, plan accordingly

Cash Flow Planning:

Use aging reports to plan:

• Short-Term: Current + 1-30 Days = expected collections in next 30-60 days
• Medium-Term: 31-60 Days = expected collections in 60-90 days
• Long-Term: 61-90+ Days = low probability, don't rely on for cash flow

The Bottom Line

The aging report is your primary tool for managing receivables. Reading it correctly—and knowing what to do with the information—is essential for cash flow management.

Key Takeaways:

• Understand Buckets: Current, 1-30, 31-60, 61-90, 90+ days
• Identify Risks: Spot patterns that indicate problems
• Action Plans: Different actions for different buckets
• Track Trends: Monitor month-over-month to see if improving
• Use for Forecasting: Plan cash flow based on aging distribution

Review your aging report regularly. Identify problems. Create action plans. Execute them. Track results.

The result: better cash flow, fewer write-offs, improved collection performance.

Ready to analyze your aging report more effectively? CollectLean generates aging reports automatically, identifies risks, and provides action plans for each bucket. See your receivables by aging stage, track trends over time, and get recommendations for improvement. Start a free 14-day trial and see how aging report analysis can improve your cash flow management.