Finance term
Accounts Receivable Aging
Also known as: AR aging, aging report
Definition
An accounts receivable aging report groups the money customers owe by how long the invoices have been outstanding — typically current, 1-30, 31-60, 61-90, and 90+ days. It is a core cash-flow and collections tool and a key input lenders review when financing receivables.
Detailed explanation
The aging report sorts every open invoice into time buckets by its due date, showing at a glance which receivables are current and which are at risk. The further an invoice slides into the 60-, 90-, and 90+-day columns, the lower the probability of full collection — so the report drives collections priorities and the allowance for doubtful accounts.
Lenders use AR aging heavily when underwriting invoice factoring and lines of credit secured by receivables: concentration (too much owed by one customer) and a heavy tail of past-due invoices both reduce how much they will advance. The SBA's financial-management guidance covers tracking receivables and cash flow (https://www.sba.gov/business-guide/manage-your-business/manage-your-finances). A healthy aging profile supports stronger net operating income and working-capital positions.
The most common summary formula is average age of receivables = (accounts receivable ÷ total credit sales) × number of days in the period — a single number that tracks whether collections are speeding up or slowing down over time, complementing the bucket-by-bucket detail in the full aging schedule.
◈ Worked example
- An aging report shows $80K current, $15K at 31-60 days, and $5K at 90+ days — the $5K is the collection risk
- A factor advances 85% on invoices under 60 days but excludes anything past 90 days from the borrowing base
- One customer representing 60% of receivables flags concentration risk during lender review
◈ Key points
- Standard aging buckets: current, 1-30, 31-60, 61-90, and 90+ days past due
- Average age of receivables = (accounts receivable ÷ total credit sales) × days in period
- Lenders financing receivables (invoice factoring, AR lines of credit) use aging to set the borrowing base and advance rate
- A heavy 90+ bucket or customer concentration over ~20-25% typically reduces what a lender will advance
Common questions
The most-asked questions about Accounts Receivable Aging — answered straightforwardly.
Why do lenders care about AR aging? +
When financing is secured by receivables (factoring, AR lines), lenders advance against invoices most likely to be collected. Past-due and concentrated receivables reduce the borrowing base and the advance rate.
What are typical aging buckets? +
Current (not yet due), 1-30, 31-60, 61-90, and 90+ days past due. The 90+ bucket is where collectibility drops sharply and write-off risk rises.
What is an accounts receivable aging schedule? +
An aging schedule (also called an aging method) is the same bucketed report — current, 1-30, 31-60, 61-90, 90+ days past due — organized by individual customer instead of just a company-wide total. It lets a business (or a lender reviewing the borrowing base) see which specific customers are slow payers rather than only the aggregate collection risk.
What is the formula for age of accounts receivable? +
Average age of receivables = (accounts receivable ÷ total credit sales) × number of days in the period. A rising number over consecutive periods signals collections are slowing down; a falling number signals faster collections. This single figure is a quick trend check that complements the full aging schedule's bucket-by-bucket detail.
How does AR aging affect how much a factoring company will advance? +
Factoring companies build the borrowing base from eligible invoices only — most exclude anything past 90 days and cap how much any single customer can represent (concentration limit, commonly 20-25% of the total). A clean aging report with most receivables current or under 60 days supports a higher advance rate; a heavy 90+ tail or one dominant customer lowers it.
Further reading
This glossary entry is educational content. ClearValue Lending is a business & personal financing platform — not a lender, broker, or financial advisor. Specific product terms vary by lender; verify with the lender or issuer before applying. See privacy policy.
https://clearvaluelending.com/glossary/accounts-receivable-aging