AR Aging
Last reviewed 2026-05-11 by Asad Ali, Founder & CEO
A report categorizing outstanding customer invoices by how long they have been unpaid.
An accounts receivable aging report (also called an aging schedule or aging report) organizes every outstanding customer invoice into time buckets — typically Current (not yet due), 1–30 days past due, 31–60, 61–90, and 90+ days. It is generated as of a specific date and groups by customer, with subtotals for each bucket. Aging reports are the primary collections management tool, the basis for estimating the Allowance for Doubtful Accounts under GAAP (the percentage-of-aging method assigns escalating uncollectibility estimates — e.g., 1% on current, 5% on 1–30 past due, 25% on 31–60, 50% on 61–90, 100% on 90+ — and the weighted sum becomes the bad debt reserve), and a required deliverable for almost every business loan or credit facility. Some lenders accept only "eligible" receivables (under 90 days, not from concentrated customers, not from related parties) when calculating borrowing base for an asset-based lending line. The aging is also used to compute Days Sales Outstanding (DSO) and to flag concentration risk (one customer above 20% of AR is a red flag for many lenders). Modern accounting software (QuickBooks, Xero, NetSuite) generates aging reports on demand with one click.
Formula
Allowance for Doubtful Accounts (aging method) = Σ (AR in each bucket × estimated uncollectibility %). Past-Due AR Ratio = (Total AR − Current) ÷ Total AR. A ratio > 20% signals a collections process problem.Example
A service company runs its AR aging report at month-end and finds: Current $40,000, 1–30 days past due $12,000, 31–60 days $5,000, 61–90 days $1,500, and 90+ days $3,000. Total AR = $61,500. The Allowance for Doubtful Accounts is recomputed: ($40,000 × 1%) + ($12,000 × 5%) + ($5,000 × 25%) + ($1,500 × 50%) + ($3,000 × 100%) = $400 + $600 + $1,250 + $750 + $3,000 = $6,000. The owner immediately calls every customer in the 31+ bucket and assigns the $3,000 of 90+ items to legal collections. With $10,500 in past-due AR, weekly collection follow-up could realistically pull DSO down by 7–10 days and free $7,000–$10,000 in cash.
Why It Matters for Your Business
The AR aging report is your early-warning system for cash flow problems — invoices that age past 90 days are typically less than 50% likely to be collected, and the worst customer concentrations always show up first in the aging buckets.
Practical Tips
- •Run your AR aging report every Monday and call every customer with an invoice past 15 days due — the first call is what gets paid first
- •Set automated dunning emails at days 7, 15, 30, and 45 past due — most overdue invoices settle after the second or third reminder
- •Flag customers exceeding 20% of total AR as concentration risk — losing one such customer could break your cash flow
- •Use the aging report as a sales-policy feedback loop — chronic slow payers should be moved to deposit-required, COD, or shortened terms before they hit the bad-debt bucket
Common Questions About AR Aging
How is ar aging calculated?
The formula is: Allowance for Doubtful Accounts (aging method) = Σ (AR in each bucket × estimated uncollectibility %). Past-Due AR Ratio = (Total AR − Current) ÷ Total AR. A ratio > 20% signals a collections process problem.. See the worked example below for a step-by-step calculation using realistic numbers.
What is an example of ar aging?
A service company runs its AR aging report at month-end and finds: Current $40,000, 1–30 days past due $12,000, 31–60 days $5,000, 61–90 days $1,500, and 90+ days $3,000. Total AR = $61,500. The Allowance for Doubtful Accounts is recomputed: ($40,000 × 1%) + ($12,000 × 5%) + ($5,000 × 25%) + ($1,500 × 50%) + ($3,000 × 100%) = $400 + $600 + $1,250 + $750 + $3,000 = $6,000. The owner immediately calls every customer in the 31+ bucket and assigns the $3,000 of 90+ items to legal collections. With $10,500 in past-due AR, weekly collection follow-up could realistically pull DSO down by 7–10 days and free $7,000–$10,000 in cash.
Why does ar aging matter for my business?
The AR aging report is your early-warning system for cash flow problems — invoices that age past 90 days are typically less than 50% likely to be collected, and the worst customer concentrations always show up first in the aging buckets.
How does FiscalInsights help with ar aging?
FiscalInsights tracks ar aging automatically as part of its AI bookkeeping workflow. Connect your bank accounts and the platform handles categorization, reconciliation, and reporting without manual entry.
Related Terms
More Invoicing Terms
Invoice
A formal document sent from seller to buyer requesting payment for goods or services delivered.
Pro Forma Invoice
A preliminary, non-binding invoice sent before goods are delivered or services completed.
Recurring Invoice
An invoice automatically generated on a fixed schedule for ongoing services or subscriptions.
Related Invoicing Guides
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