Aged debtors: the report that shows trouble before it arrives

An aged debtors report takes everything owed to you and sorts it by how overdue it is — current, thirty days, sixty, ninety and beyond. It is the single most useful page in a small company's finances and the one most often reduced to its total, which is the one number on it that carries the least information. What matters is the shape, and how the shape changed since last month.

How to read an aged debtors report

• The ninety-plus column is the collectability question — money that old is usually a dispute or a write-off rather than a delay.
• Movement between columns matters more than any single figure: balances sliding right are a process failing in real time.
• Concentration matters as much as age. One customer owing forty per cent of the total is a different risk from forty customers owing one per cent each.
• Current-but-large tells you about exposure rather than performance — that is credit risk, not a collections problem.
• Credit balances sitting in the list usually mean an unallocated payment, which is somebody chasing money you already have.

What the total hides

Two companies owed the same amount can be in completely different positions. If it is all current, nothing is wrong; if a third of it is past ninety days and the thirty-day column is filling, the business is heading for a cash problem in about two months. The total moves with revenue and therefore tells you mostly about how much you sold, which is why reading it alone produces false comfort in a growing company — the balance rises because sales rose, and the ageing gets worse unnoticed underneath.

Check for unallocated receipts before chasing anything. A surprising share of apparently overdue invoices have been paid, usually as part of a lump sum against several invoices that nobody matched up, and chasing a customer who has paid is the most expensive error in the process.

Using it monthly

1. Run it on the same day each month so the comparison is like for like.
2. Compare the column shape to last month rather than the total, and ask what moved right.
3. Pick the three largest overdue balances and name who is chasing each by when — a report without owners is an observation.
4. Set a threshold beyond which an account stops receiving further credit, and apply it rather than discussing it.
5. Review the ninety-plus column for write-off candidates quarterly instead of carrying them indefinitely.

The upstream fix

Almost everything in the right-hand columns traces back to something that happened before the invoice was sent: terms never agreed, a submission requirement nobody knew about, a purchase order number missing. The report is a diagnostic rather than a cure, and reading it well mostly tells you which part of the earlier process to repair. Collections effort applied to an invoice that was never validly submitted recovers nothing and annoys the customer.

Ettex Invoices produces the ageing from the invoices themselves with the agreed due date rather than a uniform thirty days, so the columns reflect what each customer actually agreed. Where a balance is genuinely not coming in, the decision to write it off belongs in the same record rather than in somebody's memory.