Did you know that one of the main reasons why small businesses fail is because of poor cash flow? Maintaining cash flow levels is a key challenge, and it’s critical to your small businesses’ success. Staying on top of past-due customer invoices is one of the best ways to monitor your cash flow. One of the best tools you can use in your small business to keep an eye on past due accounts and monitor cash flow is an Accounts Receivable (AR) Aging Report.
What is an AR Aging Report?
An AR aging report provides you an overview of your customers’/clients’ outstanding balances. It’s a tool often used by small businesses to determine the financial health of their customers/clients by showing the balances due from customers/clients that are falling behind on their payments. So, the longer it takes a customer to pay you, the higher the risk you run of that money not being collected.
What are the Benefits of Using an AR Aging Report?
An AR aging report helps small businesses readily identify unpaid invoices and any potential delinquency issues with customers/clients. With this accounting report, you can evaluate payment terms and business relationships with customers/clients. As a result, you’ll be equipped to make informed decisions regarding future payment terms, and you may even determine you want to sever ties with poor paying customers/clients. Unfortunately, this comes with the territory when you’re a small business owner!
AR Aging reports also helps you identify when to follow-up on invoices because they show you invoices that are “current” – meaning they are not past due, and then also show you invoices that are 1-30, 31-60, 61-90, and 90+ days past due. We recommend always following up on late receivables, but you can focus your efforts on contacting delinquent accounts that have the highest balances and the oldest balances first, as these create the highest risk to your cash flow collectability.
How Do I Prepare an AR Aging Report?
When you use accounting software, an AR aging report can easily be run with just a few clicks of your mouse.
Ready to Start Using an AR Aging Report to Manage Your Cash Flow?
Without an AR aging report, it can be challenging to maintain a healthy cash flow in your business and even more difficult to identify potential bad credit risks. By utilizing your accounting system, you can easily review your AR aging report monthly allowing you to keep your finger on the pulse of your customer’s/client’s financial health.
If you’re interested in an accounting software and guide to manage and growth your small business’s finances, you may contact or WhatsApp us at 019-477 6788 or email to accbiz.ams@gmail.com
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