How To Read an AR Aging Report

Every accounting system can produce an aging report in one click, and almost every founder who opens one does the same thing: scans the total, winces, closes the tab. Which is a shame, because the aging report is the closest thing your business has to an early-warning radar. You just have to know which four numbers to read, and I say four because after twelve years of reviewing these reports, the rest is mostly noise.

What the report actually is

The aging report lists every unpaid invoice, grouped into buckets by how overdue it is: current (not yet due), 1 to 30 days, 31 to 60, 61 to 90, and 90 plus. QuickBooks calls it A/R Aging Summary; Xero calls it Aged Receivables. Run it by customer, not by invoice, for the version that supports decisions.

The buckets matter because collectability decays with age, and it decays fast. Industry collection data has long shown the pattern: an invoice at 60 days is meaningfully harder to collect than one at 30, and past six months the odds drop toward a coin flip. Age is not just a category. It is a probability.

The four numbers

1. Percent current. Total current divided by total AR. Healthy SMB books run 70 to 85 percent current. Below 60 percent means your money has structurally migrated into the overdue buckets, and your real terms have drifted regardless of what your invoices say.

2. The 90-plus concentration. Whatever sits in 90 plus should be small and shrinking. If it exceeds roughly 10 percent of total AR, you are carrying invoices that are quietly becoming write-offs while everyone looks away. Every line in this bucket needs a named next action this week, even if the action is a final notice or a write-off decision.

3. Top-five debtor concentration. Add the five largest balances and divide by total AR. Above 60 percent means your cash flow is really five relationships wearing a spreadsheet. That is not automatically bad, but it changes your playbook: those five accounts deserve account-level conversations, not invoice-level reminders.

4. The drift. Compare this month's bucket percentages with last month's. A book can look stable in totals while invoices silently migrate rightward, current shrinking, 31-to-60 swelling. Drift is the earliest signal you get, earlier than DSO, because it shows direction before the average moves.

The Friday routine (15 minutes)

Run the report by customer. Read the four numbers and jot them somewhere you will see next Friday. Then work right to left: every 90-plus line gets an action, every 61-to-90 line gets an escalation email, every new arrival in 31-to-60 gets the direct second-touch reminder. Right to left matters because the oldest money is both the most at risk and the most ignored; human instinct chases the freshest invoices because those conversations are easier.

The report is a radar, and radar only works if someone looks at the screen on a schedule. Fifteen minutes, every Friday, four numbers. That is the whole discipline, and it is worth more than any software until it exists, and it is what good software should automate once it does. Ours (RevCollect, bias disclosed) reads the same report continuously and turns each line into a drafted next action, but the four numbers above are the point either way: know them cold, watch the drift, and never let the right side of the report go quiet.

FAQ

What are the standard aging buckets? Current, 1-30, 31-60, 61-90, and 90-plus days past due. Some businesses add 120-plus; useful once the 90-plus bucket has chronic residents, which is itself the problem to fix.

What percentage of AR should be current? 70 to 85 percent for a healthy SMB book on net 30 terms. Below 60 percent signals a systemic follow-up gap rather than a few slow customers.

Should I run the aging report by invoice or by customer? By customer for decisions, by invoice for execution. The customer view reveals concentration and account-level problems; the invoice view feeds the actual reminder queue.

How often should I review my aging report? Weekly, same day, 15 minutes. Monthly review is how invoices reach 90 days without anyone noticing the journey.