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An Aged Debtors Report has many titles, Aged Customers Report, Aged Outstanding Invoices Report, Accounts Receivable report and other name combinations. What it is, is a list of who owes your business money and how old the unpaid invoices are. If this is September, it may show you the amount you owe each customer for August, July, June and going back further if necessary. It can also list each individual unpaid invoice. Here is an example of an Aged Debtors Report.
Aged Debtors Report at 31st August
Supplier | Total | August | July | June | May | April + | App Systems | 21,000 | 10,000 | 9,000 | 2,000 | 0 | 0 | Bills Machines | 500 | 0 | 0 | 0 | 500 | 0 | Double IT | 19,000 | 6,000 | 6,000 | 6,000 | 1,000 | 0 | JJ Computers | 4,500 | 1,500 | 0 | 0 | 0 | 3,000 | QT Systems | 10,100 | 5,000 | 5,000 | 0 | 0 | 100 | Tooling Co. | -2,500 | -2,500 | 0 | 0 | 0 | 0 | Wells Mech | 3,000 | 1,500 | 1,500 | 0 | 0 | 0 | | | | | | | | Totals | 55,600
| 21,500
| 21,500
| 8,000
| 1,500
| 3,100 |
What useful information does this report give us
1. How much in total you are owed by customers
2. How old is the debt you are owed. In this case there are unpaid transactions going back to April
3. How much each customer owes you
4. How old the debt is for each individual customer
By looking at each customer, problems with customer accounts may be highlighted.
In our list above we have two customers with unpaid invoices going back to April.
Is this because?
a) There is a problem with an invoice and they refuse to pay it
b) The invoice should not have been recorded as it was not for them
c) They can't pay it because they have no money
d) The customer says they paid it or requested a credit for it
e) A customer with a very old unpaid invoice (JJ Computers) was supplied again in August. How did this get buy the credit control department?
Customer accounts with negative balances mean
a) They paid a deposit and are awaiting an invoice b) They never got an invoice c) The receipt was entered into the wrong customers account d) A mistake, the payment does not exist
If we never issued the invoice, then we never paid out the VAT and our VAT liability is understated and we may be charged interest and penalties by the tax man. Also our Sales are understated by the missing invoice amount and so are profits are understated.
By looking at the report and the age of the debt, we can use this information to forecast our cashflow. If we give 60 days credit to customers, then we know that the amount owed in June is not due to be paid until 1st September. Based on the Aged Debtors report above we are due to be paid 8,000 on the 1st September. €1,500 of May Invoices were to be paid on 1st August but have not. This should be investigated. An ever increasing Aged Debtors Balance may indicate that you will have a cashflow problem. As you must have stock to sell to customers, you must also have suppliers you owe money to. And if the credit days you give to customers is longer that the credit days you receive from you suppliers, you may be unable to pay your suppliers on time as you will still be waiting for the money from your customers. If the amount each individual customer owes you starts to increase and the number of customers you have also grows, there is a greater threat of having a bad debt. So the Aged Debtors report gives you a lot of information and can help you with not just knowing who owes you money and when it is due to be received. It also will help with forecasting cashflow, checking for missing invoices, ensuring the proper Sales amount show in your Profit and Loss every month and helps you manage your customers by giving you a monthly summary of what happened during the month. So print an Aged Debtors report at least every month, focus on late payers and and use the information on it to help manage your business and save you money by avoiding bad debts and also getting cash in quicker. |
