Overview
This aging report template is used to help you categorize accounts receivables based on the length invoices have been outstanding. This template is also used to calculate a company's allowance for doubtful accounts. An aging report details all the outstanding balances of a company's business clients. By providing an organized report of all the amounts by a business' clients, ordered by age, it is easy for a company to evaluate its clients. This is important because this allows a company to see which of their clients are risky to do business with. For example, the aging report could show that one of the company's clients regularly pays their invoices late. In this case, the company would need to re-evaluate their business terms with this client. Therefore, the aging report is a valuable tool for spotting bad clients and improving a company's accounts receivable turnover ratio or day sales outstanding ratio. Typically, aging reports are laid out in 30-day segments. CFI has designed its aging report template to reflect the industry standard. As an example, the preview for this template shows an aging report with five companies. As in the preview, Company C has $100 in outstanding payments that have been due for longer than 90 days. Alternatively, this means that Company C fails to pay for 16.7% (100/600 = 0.1667) of its purchases. Looking at this report can help the company figure out that its business terms with Company C need to be re-evaluated. Additionally, CFI's aging report template is also capable of generating an output for a company's allowance for doubtful accounts. Using the example shown in the preview again, the company has laid out a certain percentage of assumed bad debts. These percentages are as follows:
  • Current: 0% bad debts
  • 1-30 Days: 2% bad debts
  • 31-60 Days: 5% bad debts
  • 61-90 Days: 10% bad debts
  • >90 Days: 18% bad debts
By using these percentages with the aging report, the company can compute its allowance for doubtful accounts. In this case, the allowance for doubtful accounts would be $64. The aging report template is just one of the many useful tools that accountants use. To learn more about accounting and accounting tools and tricks, check out CFI's Accounting Fundamentals course!
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