What is Ageing Analysis?
Ageing analysis is a way to categorize and track outstanding invoices based on how long they’ve been unpaid (for AR) or unpaid bills (for AP). It’s a tool used to monitor cash flow, credit risk, and payment patterns.
🔹 Accounts Receivable (AR) Ageing
- Focus: Money owed TO the company by customers.
- Purpose: To spot overdue customer payments and manage collection efforts.
- Typical Age Buckets:
- Current (0–30 days)
- 31–60 days
- 61–90 days
- 91+ days
- Insight: Helps identify customers who are slow payers or potential bad debts.
🔹 Accounts Payable (AP) Ageing
- Focus: Money the company OWES to suppliers/vendors.
- Purpose: To manage cash outflows and maintain good supplier relationships.
- Typical Age Buckets:
- Current (0–30 days)
- 31–60 days
- 61–90 days
- 91+ days
- Insight: Helps you understand upcoming cash obligations and prioritize payments.
🔵 Example (simple)
|
Customer/Supplier |
Current |
31-60 days |
61-90 days |
91+ days |
Total |
|
ABC Corp |
$5,000 |
$2,000 |
$0 |
$0 |
$7,000 |
|
XYZ Ltd. |
$1,500 |
$0 |
$1,000 |
$500 |
$3,000 |
|
Total |
$6,500 |
$2,000 |
$1,000 |
$500 |
$10,000 |
🔵 Why it matters:
- For AR → Helps you speed up collections and reduce bad debts.
- For AP → Helps you avoid late fees and maintain a healthy credit profile.