Question

What are aging reports and how do they provide information pertaining to accuracy and information for that of sales? What other type of reporting helps a company keep up with their accounts and processes? When looking at the accounting system is it the ability of the system to track the changes and invoices or the person who is managing the system?

Answer 1

Hey there !

Aging Report is a report that lists unpaid customer invoices. These report which invoices are overdue for payment.

Aging report lists invoices in generally 30-day "buckets," where the columns contain the following information. However this duration may vary at different industries.

• Invoices that are 0- 30 days old
• 31-60 days old
• 61-90 days old
• Invoices more than 90 Days

This report may also contain credit memos which are still unused.

It helps to find out about the current payment status of outstanding invoices and gives a view as to how to fix credit limit for particular set of customers.

It also helps to revise the allowance for doubtful accounts.

Other reports such as Creditors Aging, Inventory aging etc are also prepared to keep up with their processes.

Other reports such as Days Sales Outstanding (DSO) Analysis can also be prepared. This measures how fast the business collects money that is due to be collected following a completed sale.

DSO = (Accounts receivable / total credit sales) x number of days in period.

An entity can also prepare Average Days Delinquency report that indicates how efficient the business processes are in their ability to collect receivables on time. It can be calculated as (Days Sales Outstanding – Best Possible Days Sales Outstanding).

The ability to track changes in system and invoices should be within the system and it should not be manual process. To ensure that the process is fair and transparent and free from human error, the same should be automated and not manual.