accounts receivable aging
A report categorizing unpaid customer invoices by how long they have been outstanding, helping identify overdue accounts and potential bad debts.
Example
“The AR aging report showed $50,000 in invoices over 90 days past due — a bad debt risk requiring collection action.”
Memory Tip
AR AGING = how OLD are your unpaid invoices? Older = harder to collect.
Why It Matters
Understanding accounts receivable aging helps business owners and managers monitor cash flow and identify which customers are not paying on time. This directly impacts a company's ability to pay its own bills and make investments, making it crucial for financial health and planning.
Common Misconception
Many people think that accounts receivable aging only tracks overdue invoices, but it actually categorizes all unpaid invoices by age ranges such as current, 30-60 days old, 60-90 days old, and over 90 days old. This broader view helps identify trends before accounts become severely delinquent.
In Practice
A small consulting firm might have an aging report showing that out of 50,000 dollars in unpaid invoices, 30,000 dollars are current, 12,000 dollars are 30-60 days overdue, and 8,000 dollars are over 90 days overdue. This report alerts the owner to follow up aggressively on the oldest accounts and adjust future credit terms for repeat slow payers.
Etymology
ACCOUNTS RECEIVABLE (money owed to company) AGING (grouped by age/time outstanding).
Common Misspellings
Small business accounting made simple
Related Terms
More in accounting
Other accounting terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.