How to Calculate Accounts Receivable Aging: Definition and Examples

2025 marks a turning point for accounts receivable (AR) management. Over 50% of global B2B invoices are overdue, costing businesses billions every year. That’s why tracking overdue invoices is more important than ever, ensuring smoother cash flow and better business decisions. 

Businesses can determine which invoices require attention and take action before past-due amounts accumulate by knowing the aging of accounts receivable formula. This simple yet effective tool aids in managing credit risk, prioritizing collections, and maintaining business operations, all of which lead to a more secure financial future.

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What is the Aging Formula?

The aging of the accounts receivable formula is simple yet powerful. It categorizes outstanding invoices based on how many days have passed since the due date. The formula is as follows:

Aging Formula:

• 0-30 days: Invoices that are within the payment terms.
• 31-60 days: Invoices that are slightly overdue.
• 61-90 days: Invoices that have been overdue for a longer period.
• 90+ days: Invoices that are significantly overdue.

Businesses can use this method to track past-due bills by age and take early action to recover the money. For lowering financial risks, enhancing cash flow, and preventing bad debt, it is a vital tool.

After discussing the aging formula, let's explore how to calculate accounts receivable aging in order to handle past-due invoices efficiently. 

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Steps to Calculate Accounts Receivable Aging

Calculating accounts receivable aging requires a systematic approach. Here’s a step-by-step guide on how to do it effectively:

Step 1: Gather Invoice Data

Start by gathering all necessary invoice information, such as the invoice number, client name, date, total amount owed, and terms of payment.

Example Calculation:

• Invoice Number: 001
• Customer: XYZ Corp.
• Invoice Date: March 1st
• Amount Due: $5,000
• Payment Terms: 30 days

In this example, the invoice is due on March 31st (30 days from March 1st).

Step 2: Define Aging Periods

Next, define the aging periods according to how long the invoice is past due. Typical aging stages include:

• 0-30 days
• 31-60 days
• 61-90 days
• 90+ days

Example Calculation: 

Let’s assume today’s date is May 15th.

• The invoice from XYZ Corp. was due on March 31st.
• This invoice has been overdue for 45 days, so it falls into the 31-60 days category.

Step 3: Categorize Receivables by Age

After defining the aging periods, group all outstanding invoices into their respective categories based on the number of days overdue.

Example Calculation:

• Invoice 001 for XYZ Corp. ($5,000) is 45 days overdue, so it falls into the 31-60 days category.
• Invoice 002 for ABC Ltd. ($3,000) is 10 days overdue, so it falls into the 0-30 days category.
• Invoice 003 for DEF Inc. ($2,500) is 75 days overdue, so it falls into the 61-90 days category.
• Invoice 004 for GHI Co. ($4,000) is 120 days overdue, so it falls into the 90+ days category.

Now we have our invoices categorized by age, which will help prioritize collection efforts.

Step 4: Calculate the Amount Due in Each Category

The next step is to sum the amounts in each aging category to get a clear picture of how much is outstanding in each group.

Example Calculation:

• 0-30 days: Invoice 002 ($3,000)
• 31-60 days: Invoice 001 ($5,000)
• 61-90 days: Invoice 003 ($2,500)
• 90+ days: Invoice 004 ($4,000)

Total for each category:

• 0-30 days: $3,000
• 31-60 days: $5,000
• 61-90 days: $2,500
• 90+ days: $4,000

Now, you can clearly see how much is outstanding in each category, helping you prioritize collection efforts for overdue invoices.

Pro Tip: Tools like QuickBooks or Bill.com can automate the categorization and summing of invoices, making it easier to generate reports without manual calculations.

By calculating your aging receivables, you gain insights that help you move to the next step: generating and maintaining accurate aging reports.

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Key Components of an Accounts Receivable Aging Report

Businesses can monitor their unpaid invoices and assess the financial health of their receivables with the aid of an accounts receivable aging report, which is a comprehensive document. The following are the key components that you must include:

This chart highlights the key components of an accounts receivable aging report, with "Aging Categories" being the most crucial for prioritizing collections and managing overdue accounts, as shown in a 2025 survey on receivables management.

1. Customer Information: The report should contain the customer’s name, contact information, and account details. This facilitates follow-ups by enabling you to determine which customers owe what quickly.
2. Invoice Information: Make sure that every invoice in the report contains the necessary information, such as the invoice number, issue date, terms of payment, and total amount owed. This data allows for easy tracking of overdue invoices.
3. Categories of Aging: Every unpaid invoice needs to be divided into distinct age groups, such as 0–30 days, 31–60 days, and so on. This segmentation allows for better prioritization in collection efforts.
4. Outstanding Amounts: List the total amount due for each age group at the end. This is vital for businesses to understand where they stand financially and which accounts need attention.

With these key components in place, you’re ready to create an effective aging report. Let’s now look at how to generate and maintain it.

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How to Create an Accounts Receivable Aging Report

Creating an accounts receivable aging report involves organizing invoice data by age category to track outstanding payments. Here are the ways to create it: 

1. Using Spreadsheets and Software

To generate and manage your reports, you can utilize Excel or accounting software such as Xero and QuickBooks. The categorizing process is automated by these tools, which also produce real-time aging data that are updated whenever fresh invoices are sent out or payments are received.

2. Organizing Invoices

After entering the data, group invoices according to their age classifications. This enables you to prioritize following up with clients who need attention and keep track of past-due payments.

3. Regular Updates & Maintenance

You can take prompt action on past-due accounts and make sure you're always handling the most recent data by updating the aging report on a regular basis, preferably weekly or monthly. Keeping these reports up to date helps businesses forecast cash flow more accurately.

You may be interested in this: Check out our article on Strategies to Improve Your Accounts Receivable Collections Process for actionable tips!

After discussing how to generate your aging report, let's discuss how to evaluate and utilize it efficiently.

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How to Analyze and Use Accounts Receivable Aging Reports

When your report on the aging of your accounts receivable is ready, it's time to look at the data to enhance collections and make smart decisions.

1. Find Past-Due Accounts: To begin, look for past-due invoices in categories such as 31–60 days and 90+ days. These accounts should be prioritized for collection efforts.
2. Review Credit Policies: It might be time to review your credit policies if you observe a large number of past-due accounts. Tightening payment terms or adjusting credit limits can help reduce the risk of late payments.
3. Forecast Cash Flow: To help you prepare for future spending and prevent financial gaps, use aging reports to forecast when cash will arrive.
4. Improve Collection Strategies: Use customized collection tactics, such as providing payment plans or early settlement discounts, to target high-risk accounts first.

Looking for effective accounts receivable solutions? 

South East Client Services (SECS) can help streamline your collections process and improve cash flow management with their specialized services. Their team can help you promptly and effectively collect past-due payments.

You can take proactive measures to maintain control over past-due accounts and enhance cash flow management by routinely reviewing your aging reports. Let’s wrap up with key takeaways. 

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Conclusion

Businesses can manage past-due invoices, enhance cash flow, and make well-informed decisions by using accounts receivable aging. Businesses can take proactive measures to collect payments and lower financial risks by classifying invoices and calculating aging periods.

South East Client Services (SECS) is a U.S.-based receivables management firm specializing in debt collection, portfolio acquisitions, and account servicing. Their expertise aids companies in improving cash flow, expediting collections, and efficiently managing receivables.

Are you ready to simplify your collections process? Partner with SECS to improve your receivables management and boost your financial health today.

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