What an aged debtors report shows
An aged debtors report lists each customer with outstanding invoices, grouped by age bands: typically current (not yet due), 1 to 30 days overdue, 31 to 60 days overdue, 61 to 90 days overdue, and 90 days+ overdue. The report allows you to see immediately which customers are consistently late and which accounts are at risk of becoming bad debts.
How to use your aged debtors report
The report should drive your credit control activity. Use it to identify which accounts need chasing immediately, which need a formal reminder letter, and which may require escalation to a solicitor or debt collection agency. Accounts in the 90-day-plus band should be reviewed urgently.
Invoice finance lenders will review your aged debtors report as part of the facility set-up and ongoing audits. A clean, current ledger with few overdue invoices will achieve a better advance rate. Significant overdue balances may reduce your eligible ledger.
Provisions for bad debt
Invoices that remain unpaid beyond a certain point should be considered for bad debt provision in your management accounts. HMRC allows a specific provision against invoices that are genuinely doubtful or where legal proceedings have been commenced. A general provision against all debtors is not allowable for tax purposes.
Frequently Asked Questions
How often should I review my aged debtors report?
For active credit control, weekly review is recommended. Monthly review is a minimum. In businesses with high invoice volumes, daily automated reporting is standard practice.
What is the maximum debtor age that invoice finance lenders accept?
Most invoice finance lenders will only advance against invoices less than 90 days old. Invoices over 90 days are typically excluded from the eligible ledger. Some lenders cap eligibility at 60 days.