What is the aging of receivables?

One of the key elements in any feasible receivable management program is to provide periodic messages that show the aging process for outstanding invoices issued to customers for provided goods and services. The process of aging receivables is the means by which these reports are compiled and provided to the right organization officers. Here are a few reasons why the aging of receivables is so important and why you are aware of the outstanding balance of receivables at the moment is so essential for financial health of any company.

Aging of receivables is a valuable part of the ability to structure the operating budget for the company. Understanding the existing payment habits of customers and appropriately with the need for a permanent income of the company in order to fulfill its outstanding obligations, it helps to ensure that the organization has funds in hand at that date to take care of operating costs. Without maintaining a constant vigiliepokud, this is a flow of income to society, it is not possible to DEPROOVat and work within a solid budget.

For example, if your company is charging clients for thirty -day conditions, but the largest clients are constantly paying for forty -five days, this is a smart step to ensure payment conditions for their dealers that reflect this business reality. Unrecognizing the difference between the required payment term and the average scope of payments used by most of your customers will result in operating capital, as it has brought obligations that it cannot meet within an acceptable time framework. This will negatively affect your relationship with your dealers, which in turn could affect your ability to operate and serve your client base.

Second, the aging of receivables is an excellent tool in terms of strengthening links with clients. If a periodic message shows that a regular charromer has an excellent invoice for ninety days but paid dockNCE and invoices sent thirty days ago is the opportunity to contact the customer and ask about the status of the invoice. Quite often, the invoice can be simply a mistake and the payment can be reduced immediately as soon as the problem is announced. Questions of this nature would not be possible if the accurate aging of the receivables was not maintained.

Moving a step further, the aging of receivables can help indicate when it may be time to interrupt the customer's relationship. If the aging periodic report consistently shows that the client has problems with paying invoices in time, it may be time to explore the financial health of this company. Many companies will use the aging of receivables to determine whether any investigation is required. For example, a client who consistently has invoices falling into ninety to one hundred and twenty -day before making payments could be going to fold in the conquest.

Rather than offering services that will eventually have to be written as bad debts, use the aging of receivables to avoid this problem. PoundPry client that your company will not be able to provide additional services unless the outstanding balances of receivables are listed and for future use there will be some agreements on preliminary payments.