courses › Bookkeeping

Receivables & Payables Aging

level 31 course

Who owes you, how late it is, what may never arrive, and which bills are due.

In your head, jot if needed · no calculator why?

Opens at level 31.

Builds on: Invoices & Sales Tax (not open yet)

the lesson

The idea, the techniques and a tip for each skill, right here. The Learn page adds worked examples for every skill and untimed practice.

Read the lesson · about 3 minutes

The idea

An aging report sorts unpaid invoices by how late they are. Lateness counts from the due date, not the invoice date. Net-30 terms mean payment is due 30 days after the invoice, so an invoice sent 45 days ago is 15 days past due.

The usual buckets are current (not past due), 1 to 30 days past due, 31 to 60, 61 to 90, and over 90. The older the bucket, the less likely the money arrives, so each bucket gets its own expected loss.

For bills you owe, add the ones due soon to see the cash you need.

Techniques

Count from the due date

You know how old an invoice is and its payment terms.

Take the terms off the days since the invoice.
What is left is the days past due.
Zero or less means current: not past due.

worked example

Example: An invoice dated 70 days ago has net-30 terms. How many days past due is it?

It was due 30 days after the invoice date.
Days past due: 70 − 30 = 40.
That puts it in the 31 to 60 day bucket.

Answer: 40

Bucket by bucket

Each age bucket has its own assumed loss rate.

Multiply each bucket's balance by its own rate.
Add the results.

worked example

Example: Current receivables are $10,000 (assume 2% won't be collected), 31 to 60 days $4,000 (assume 10%), and over 90 days $1,000 (assume 50%). What total amount is expected to go uncollected?

$10,000 × 0.02 = $200. $4,000 × 0.1 = $400.
$1,000 × 0.5 = $500.
Total: $200 + $400 + $500 = $1,100.

Answer: $1,100

Filter, then add

Adding only invoices past a cutoff, or bills due within a window.

Read the cutoff, and whether it says "more than" or "within".
Mark each line that qualifies, then add only those.

worked example

Example: Bills: $500 due in 2 days, $1,200 due in 9 days, $300 due today, $800 due in 20 days. How much is due in the next 10 days, counting today?

Due within 10 days: $500, $1,200 and $300.
Total: $500 + $1,200 + $300 = $2,000.

Answer: $2,000

Tips by skill

TipDays past due: Subtract the terms from the days since the invoice. Net-30 means due 30 days after the invoice date.
TipWhich aging bucket?: Find the days past the due date. Zero or less is current; otherwise 1 to 30, 31 to 60, 61 to 90, or over 90.
TipHow much is seriously late?: Add only the invoices more days past due than the cutoff. Leave the rest out.
TipExpected uncollectible: Multiply each bucket by its own rate, then add. Older buckets carry higher rates.
TipBills due this week: Add only the bills due within the window, counting today. Later bills stay out.

Watch out for

Counting lateness from the invoice date instead of the due date.
Applying one average percent to all receivables. Older invoices carry much more risk.
Including an invoice below the cutoff, like a 45-day invoice in a total of those more than 60 days past due.
Adding every bill, which overstates the cash you need in the window.

skills · practice stats

From rounds of this course only: box, review and test-out answers are left out. Once a skill has 40 tries, it compares your first 20 tries with your last 20.

Days past due par 14 s not tried yet
worked example
An invoice dated 105 days ago has net-15 terms (payment due 15 days after the invoice date). How many days past due is it?

Answer: 90
1. It was due 15 days after the invoice date, so it's 105 − 15 = 90 days late.
Which aging bucket? par 10 s not tried yet
worked example
An invoice is 30 days past due. Which aging bucket does it belong in?
1. Current (not yet due)
2. 31–60 days past due
3. 1–30 days past due
4. 61–90 days past due
Answer: 1–30 days past due
1. 30 days past due puts it in the "1–30 days past due" bucket.
2. Aging sorts unpaid invoices by how late they are; the older the bucket, the less likely the money arrives.
How much is seriously late? par 19 s not tried yet
worked example
Invoices past due: $1,500 (11 days), $2,500 (94 days), $2,700 (121 days), $2,400 (110 days). How much is more than 30 days past due?

Answer: $7,600.00
1. Add only the invoices more than 30 days late: $2,500 + $2,700 + $2,400 = $7,600.
Expected uncollectible par 25 s not tried yet
worked example
Receivables by age: current $30,000 (assume 1% won't be collected), 1–30 days past due $29,000 (assume 4%), over 90 days past due $8,000 (assume 40%). What total amount is expected to go uncollected?

Answer: $4,660.00
1. Multiply each bucket by its rate and add:
2. $30,000 × 1% = $300; $29,000 × 4% = $1,160; $8,000 × 40% = $3,200.
3. $300 + $1,160 + $3,200 = $4,660.
Bills due this week par 21 s not tried yet
worked example
Bills: $2,900 due in 18 days, $2,900 due in 19 days, $2,550 due in 8 days, $2,600 due in 3 days. How much is due in the next 10 days, counting today?

Answer: $5,150.00
1. Add the bills due in the next 10 days, counting today: $2,550 + $2,600 = $5,150.
2. That's the cash you need for suppliers over the next 10 days.

rest ladder

Win 3 of your last 4 rounds and the course rests. A win is 90% right, within 2× the round's par. Pass the review when it comes back and the next rest is longer.

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