Reading an Aging Report: Who to Chase First

Why this matters

Money a customer owes you is not money you have. An invoice sitting unpaid is your cash funding someone else's project. The aging report is the tool that shows you exactly whose hands your cash is in and how long it has been gone. Read it right and you collect faster, write off less, and stop the slow bleed that turns a profitable shop into a cash-starved one. Most owners glance at the total owed and miss the story in the buckets.

What an aging report is

Accounts receivable, or AR, is the total your customers owe you on invoices you have sent but not been paid for. An aging report sorts that AR by how overdue each invoice is, in buckets:

• Current (not yet past due).
• 1 to 30 days past due.
• 31 to 60 days past due.
• 61 to 90 days past due.
• 90 plus days past due.

The buckets are the whole point. A pile of current invoices is normal and healthy. The same pile sitting in the 90-plus column is a crisis. Same total, completely different meaning.

The aging curve is a probability curve

Here is the rule that should drive every collections decision: the older a debt gets, the less likely you ever collect it, and the drop is steep. Trade-standard experience puts it roughly like this - an invoice fresh past due is almost certainly collectible, one past 90 days is collectible far less than half the time, and once it crosses several months the odds fall off a cliff.

That single fact tells you who to chase first. It is not the largest balance. It is the oldest balance that still has a real chance of being collected, because every week you wait, its odds of payment fall.

Who to chase first, in order

Work the report in this priority:

1. Large balances entering the 31 to 60 bucket. Big and just starting to slip. This is where a phone call still works and the dollars at risk are highest. Highest-value use of your time.
2. Anything aging past 60 days, largest first. The collection odds are dropping fast here. Be firm, set a date, and escalate if the date passes.
3. Many small invoices in the 1 to 30 bucket from the same customer. A customer who lets several small ones stack up is showing you a pattern. Catch it before it becomes a large old balance.
4. The 90-plus pile last for effort, first for decisions. These need a decision (final demand, payment plan, or write-off) more than another friendly reminder. Do not pour your best collection hours into the lowest-odds bucket.

Ratios that read the whole report at once

Two numbers turn the report into a dashboard:

• Percent of AR over 60 days. If a large share of what you are owed sits past 60 days, your collections process is broken, not just a few bad customers. Healthy shops keep the over-60 share small.
• Days sales outstanding (DSO). The average number of days it takes to get paid after invoicing. Rising DSO means cash is arriving slower than it used to, even if no single invoice looks alarming. Watch the trend more than the absolute number.

Reading the warning signs

• A single customer dominating the old buckets is concentration risk. If one slow payer is a big chunk of your AR, your cash flow depends on their goodwill. Tighten their terms or require deposits.
• The current bucket shrinking while older buckets grow means new billing has slowed or collections have stalled. Either way, cash is about to get tight.
• Repeat 90-plus from the same names is a credit problem. Some customers should be cash-on-delivery or deposit-first, full stop.

What the report should make you do

The aging report is not a record to file, it is a worklist. Each week, sort by age, start your calls at the highest-value slipping balances, set firm payment dates, and make the write-off-or-pursue call on the oldest pile instead of letting it rot. Pair it with faster invoicing - the clock starts when you bill, so billing the day the job closes is the cheapest collections improvement there is.

References

• U.S. Small Business Administration: accounts-receivable and cash-flow management guidance.
• Standard accounting practice on AR aging and days-sales-outstanding.
• See related: Seasonal Cash Reserve, How Much to Set Aside.
• See related: Good Debt vs Bad Debt for a Service Business.