AR Aging Analysis — Spot Collection Problems

The oldest invoices hide your cash problem

A receivables balance of $68,000 looks like $68,000 on its way to you. If $13,000 of it is more than 60 days overdue, that is not what you have — the older portion is worth materially less than face value, because the probability of collection falls sharply with age.

An invoice does not become uncollectable suddenly; it fades. That decline is steep and well established in practice, which is the entire reason the aging report exists. This tool splits the balance into 0–30, 31–60, 61–90 and 90+ days so you can see where the problem actually sits rather than looking at one reassuring total.

The 20% threshold

The tool flags when receivables over 60 days old exceed 20% of the total, and that flag means something specific: at that level you no longer have a few slow payers, you have a structural issue. Credit policy has drifted, follow-up is not happening on a schedule, or you are carrying customers who were never going to pay.

Anything sitting in the 90+ bucket should already be in active collection or provisioned for write-down. Carrying it at full value on the books flatters the balance sheet and obscures your real position.

Aging turns a number into a priority list

This is the practical payoff. Two customers each owing $10,000 look identical in a total. If one is current and the other is 120 days past due, they are entirely different problems requiring entirely different actions — a reminder, a phone call and a payment plan, or a decision about escalation and write-off.

Worth noting what the tool cannot show you: it reports aggregate amounts per bucket, not which customers own them. If your entire 90+ balance is a single account, you have concentration risk that no bucket total will reveal — for that, age your receivables by customer from your accounting subledger. Concentration usually matters more than the aggregate, because a receivables position weighted to one relationship is really a bet on that relationship.

Why this drives cash rather than profit

Your profit-and-loss recognises revenue when you invoice. Cash arrives when the customer pays. Receivables are precisely the gap between those two facts, and it stays invisible until you age them.

This is how a genuinely profitable business runs out of money — the profit is real and recorded, and none of it is in the bank. Most late payment, incidentally, is administrative rather than adversarial: clear terms on the invoice, invoicing promptly instead of in monthly batches, and consistent follow-up on a fixed cadence prevent a surprising amount of it.

The DSO and DPO calculator gives you collection speed as a single average, which is useful alongside this rather than instead of it — a stable average can conceal a steadily growing oldest bucket. General business information, not accounting, legal or credit advice.