What’s an aged debtor report? And how does it help my cashflow?

Poppy fields

If you dive into the reports in your accounting software, you’re likely to find an ‘aged debtor report’ template listed there. But what is an aged debtor report and how are your aged debt and debtor days numbers linked to your overall liabilities and cashflow as a business?

We’ve outlined a key definition of an aged debtor report, and how this report provides the foundations for much of your company’s credit control processes.

What’s an aged debtor report?

An aged debtor report (or aged receivables report) lists all unpaid sales invoices – showing you the overall amount of money you’re owed at a given date, broken down by customer.

In Xero, for example, the basic aged receivables report looks like this:

Fluidly is a Xero connected app

This debtor report lists the total amount of debt (unpaid sales invoices) by month, giving you a breakdown for each customer. You can then drill down to see the invoice number, amount due and the date that the payment is due. It will also show any invoices that are past the invoice due date – and are therefore late, not in line with your invoice payment terms and need to be chased up with the customer.

Why is aged debt important?

Aged debt is a measurement of the total money you’re owed by your customers. And the time it takes for customers to pay, on average, is measured by your ‘debtor days’ number – a key performance indicator (KPI) that is critical to any business’ cashflow.

Bringing in a healthy number of sales is key to good cashflow, but you also don’t want lots of old debt in the business if those customers fail to pay their bill. Keeping aged debt under control and debtor days low (particularly relative to credit terms) improves your financial health. If your customers are paying you quickly, and your liabilities (level of debt) are kept minimal as a result, then that sets the business up to be in a good financial position going forward.

How does managing debt help cashflow?

Positive cashflow is easier to achieve when you get paid on time. Managing cashflow is all about ensuring the cash flowing into the business is greater than the money flowing out – and when debt is managed well, you increase the speed and volume of money coming into the company.

Having a credit control function in the business helps achieve this, by reviewing your aged debts, tracking outstanding payments and proactively chasing customers for payment.

What’s good practice for debtor tracking?

To manage your aged debts effectively, it’s important to have both a historic, real-time and future view of your debtors – and this is where modern fintech apps add real value.

View of your aged debt in Fluidly

Using a smart cashflow and debtor-tracking tool, such as Fluidly, allows you to pull through your financial data from your accounts and provide the clearest possible overview of your past, current and future debts.

With this information at your fingertips, and Fluidly automatically implementing a credit control structure in the background, your finance team can actively start reducing the size of your unpaid debt.

To get proactive with your aged debt:

  • View your aged debtor reports regularly – so you’re as up to date as possible on your outstanding invoices and late-paying customers.
  • Prioritise your key debts and late-paying customers – look at the size of the debts, by invoice, customer and due date, and rank them in order of priority.
  • Automate your notifications and email chasinguse software automation features to automatically send emails to late-paying customers, and send alerts to your finance team when payment isn’t received and needs collecting.
  • Enforce your payment terms – make your expected invoice terms clear, both on your invoices and in a formal credit control policy. And when customers don’t pay on time, bring your stated debtor chasing procedures into play.

The volatile nature of customer’s payment habits means you’re unlikely to get paid on time every time by every customer. But with a clear focus on your aged debtors, supported by clear information from your finance tools, you can aim to keep that debt level as low as possible.

Get in control of your debt

To get a drilled down overview of your aged debt, use Fluidly’s smart cashflow and debtor tracking engine to get detailed reporting of your debts, automated chasing of your late-paying customers and forecasting of your cash position.

Let Fluidly keep an eye on your debt and cashflow