What it is
An A/R aging report buckets every outstanding customer invoice by how long it's been unpaid: current, 30 days, 60, 90, and beyond. Paired with the business's bad debt history, it shows not just what customers owe today, but the business's actual track record of collecting what it's owed.
A report showing 70% of receivables current and 5% over 90 days looks very different from one where a third of everything owed is more than three months overdue, even if the total dollar amount owed is identical.
Why it matters
Revenue on the P&L isn't cash in the bank until it's collected. A business that looks profitable on paper but is carrying a growing pile of receivables no one is chasing down may be overstating how healthy its cash flow really is, and you inherit that collections problem, and that customer relationship, on day one.
What to look for
- A growing share of receivables aged past 90 days
- Bad debt write-offs trending upward year over year
- Overdue balances concentrated in one or two customers rather than spread across the book
- No formal collections process — invoices that just sit until someone remembers to follow up
This guide is for informational and educational purposes only. It does not constitute legal, tax, financial, investment, or lending advice, and is not a substitute for advice from a qualified attorney, accountant, lender, or other licensed professional.