Aged debtors report: what it is and how it can reduce your debtor days
If you’re researching the term “aged debtors report”, it’s probably for one of the following reasons:
- You aren’t sure what an aged debtors report is – which might also mean you aren’t aware how long your customers take to pay you on average.
- Maybe you have a vague idea that an aged debtors report relates to debtor days, and you want to find out more as high debtor days is a problem you’re dealing with.
- You’ve heard of or seen an aged debtors report but don’t know how to use it.
- You know what an aged debtors report shows, but you aren’t sure what to do with the information to improve your debtor days. What should be your next steps?
Note: We’re going to look at all of this and more in this article. But if you want to dive straight into a platform that gives you access to a ready-made aged debtors report plus other valuable risk insights alongside an automated credit control system and invoice financing, get started with Satago today.
What is an aged debtors report and how does it work?
Before we look at what an aged debtors report is, let’s start with the term “aged debt”. Your aged debt is the total amount of money owed to your business by your customers. It often goes hand-in-hand with your debtor days, which refers to the length of time it takes your customers to pay you on average.
Sometimes also known as an aged receivables report or aged receivables detail report, an aged debtors report shows a summary of money owed, broken down by the age of the debt.
The rows in the report are client names, and the first column generally shows the total amount that isn’t due yet, then the next column shows the total that’s 0-30 days overdue, the next column the total that’s 30-60 days overdue, then 60-90 days overdue, and finally 90+ days overdue.
You might have a couple of entries for the same client in different columns, which shows they owe you for two invoices that are a different amount of time overdue.
The aged debtors report gives a good overview of the current state of your invoices and allows you or your accountant to see how old your debt is and where you should focus your efforts to be paid as soon as possible.
How to create an aged debtors report
We’re going to cover three ways to create an aged debtors report:
- With Satago
- Via your accounting tool
- With Excel or Google sheets
With Satago
With Satago, as long as your accounting software is connected and your bookkeeping is up to date, there’s nothing you need to do to create an aged debtors report – the information is ready and waiting for you in Risk Insights.
Head to Risk Insights > Analysis and you’ll find the aged debtors report at the top left of the dashboard. You can expand this report by clicking the arrow in the top right corner to show a list of customers and how overdue their invoices are, with a total at the end of each row.
Next, scroll down to the risk concentration report just underneath. Instead of listing out the clients, here Satago lists by risk. This adds another dimension to the report and offers you a different layer of insight.
For example, it’s one thing to know you’re owed £10,000, and another if you then know £7,000 of that is late. But if £6,000 of that late amount is with high risk customers, you know that’s where you should focus your efforts.
Satago customers get a good picture of the overall situation. They can see what’s really going on with their debtors and how risky they are, and therefore how likely they are to get paid.
Where the elements in a report are clickable, you can drill down further. Links make it easier to navigate the platform and bring up more information, instead of having to leave the report and go to another area of Satago to find out what invoices an amount relates to, or when you last contacted a customer for example.
You can also easily see what you can charge in late fees, which is something very few other providers offer, and many SMEs aren’t even aware they can do.
Via your accounting tool
The majority of people using accounting software will choose to get their aged debtors report from there, but what that looks like differs between providers.
In some accounting software products – like Sage 50 – you can get a couple of different aged debtors reports:
- Summary: This shows a list of your clients, how much they owe and how overdue it is. Each column is totalled.
- Detailed: As above, with the addition of invoice details.
Xero, Quickbooks and FreeAgent just offer the summary version detailed above, and Sage, Xero and Quickbooks don’t automatically calculate late payments either. They might also use other words, like “Aged Receivables”.
Depending on the accounting software you use, you should find the aged debtors report in the Reporting section. You might need to set a few parameters such as the date range you want to look at, and how you want to divide the time periods (usually this is in increments of 30 days). When you’ve done that, your software should generate the report for you.
With Excel or Google sheets
If you aren’t using accounting or invoicing software, you’re probably listing sales invoices sent on a spreadsheet and marking them off manually when paid.
This is more a list than an aged debtors report and won’t include the columns showing how many days overdue a payment is (unless you’ve added them in). But it would be enough if you don’t have that many customers to keep track of.
The main downside of doing it this way is that you’ll need to update your spreadsheet manually as part of your bookkeeping process, since it won’t automatically update like the other options above.
What you can do with the information in your aged debtors report
As a business owner you might know you have a lot of outstanding invoices, but you might not be entirely sure how many, what the total amount outstanding is, or how late they are.
The information in your aged debtors report can help you decide what action you need to take to reduce your debtor days, as it gives you a good awareness of the business’s financial health.
You might decide to:
- Do more proactive chasing.
- Outsource the chasing to someone else.
- Review your credit control policies.
- Make sure you’ve got credit limits for your clients, and nobody exceeds them.
- Make sure that you’re checking what’s already owed to you before you do more work and put measures in place to improve that position for the future.
- Work on improving cash flow forecasting.
You can’t decide what to do as easily if you don’t fully understand what the problem is in the first place.
But how do you know if you’ve got a high number of debtor days? It depends on the industry you’re in and what the standard is. If you know you have a high number of debtors, look at your liquidity ratio – how do your assets compare to your liabilities? If your liabilities are higher than your assets, that might be a bad sign.
As a general rule of thumb, it isn’t ideal for more than half of your debtors to be overdue. And you’d probably want to start taking action if even 25% of your debtors are overdue.
Nurture your client relationships while getting paid faster with Satago
In this article we’ve looked at aged debtors reports, what they are and what information they contain.
Sign up today to try the all-in-one cash flow management Satago platform for yourself and see how our risk insights can help you tailor our ready-to-go automated credit control system to your clients to help you get paid faster and with less hassle.
