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How to Carry Out an Aged Debtors Analysis

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMay 20222 min read

If you use accounting software, you’ve likely come across the aged debtors analysis report function. If, like many others you’re wondering what aged debtors means exactly, then you’ve come to the right place to find out.

In this post, we’ll outline an aged debt definition, why it’s important, and run through some tips on how best to carry out an aged debtor analysis report.

How to carry out an aged debtors analysis

In order to manage aged debts efficiently, it’s imperative that businesses have thorough, collated information on historic, current and future debtors. Having good accounting software to facilitate this can be a real help.Debtor Daddy's integration with Xero is a software tool for managing accounts receivable. It provides a clear picture of aged debts and offers functions which reduce late payments.

With unpaid debt information easily available to you, your accounting team can begin to tackle unpaid debt and stay on top of unpaid invoices and late payments. This can be done in some of the following ways:

Access your aged debtor reports frequently. This allows you to stay up to date with outstanding and overdue invoices.
Order your debts and late-paying customers according to priority – I.e. rank them in order of the size of the debt and how overdue it is.
Set up automated late payment notifications and emails to late paying customers.

Unfortunately, there’s no surefire way to avoid late payments altogether. However, with greater clarity and transparency surrounding aged debtors, information can be used as a tool to help keep debt to a minimum.

Aged debt analysis definition

An aged debtor report, which is sometimes known as an aged receivables reports, collates all unpaid invoices and displays them with details of the money owed and the customers owing.

The report makes it easy for businesses to see the total amount of debt they’re owed from unpaid sales invoices and information about the concerned customers. It also clearly shows the invoice number, the amount due and whether or not the invoice is overdue. In the case of the latter scenario, the report will signal to business owners when they need to follow up with a customer for payment.

The importance of aged debtor reports

Aged debt shows you how much money you’re owed by customers. It also calculates the average amount of time it takes customers to pay with the ‘debtor days’ feature. This forms a key performance indicator (KPI) crucial to cash flow management.

A high number of sales is usually indicative of good cash flow. However, if customer bills aren’t paid, it can lead to the accumulation of old debt. Keeping this aged debt to a minimum, especially relative to credit terms, is essential to keeping a company in good financial health. Ideally, customers will pay promptly, and liabilities will be kept to a minimum. This will lead to a healthy looking aged debt report, and a healthier financial picture overall.

Customer payments with GoCardless

Avoiding late payments as far as possible will lead to your aged debtor report looking much healthier. A great way to decrease late payments is to collect invoice payments directly from customers, without having to wait for them to initiate the payment.

With GoCardless, businesses can retrieve pull payments from customers, saving both time and money. In fact businesses can get paid up to twice as fast by accepting GoCardless payments on their online invoices.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.