Brief Introduction
Looking at an aged debtors report for the first time can be daunting – you may be wondering where to start, what’s the best way to follow up debtors, or why managing debtors even matters to your business.
Don’t worry – in this article, we’ll go through an introduction to debtors, importance of the aged debtors report, how to prepare it, and our cheat-sheet for managing debtors.
Table of Contents
- Understanding Your Aged Debtors
- Why is the Aged Debtors Report Important for my Business?
- How to Manually Conduct Debtors Analysis
- Best Practises for Contacting Debtors
Understanding Your Aged Debtors
What is a Debtor?
A debtor is a customer who owes money to your business, where you should receive payment from them for an invoice at a later date. This is sometimes referred to accounts receivable.
What is an Aged Debtor?
An aged debtor is a customer who owes money to your company. The amount due is set against a date, or ‘aged’. Ageing is used to help you better understand which invoices are due or overdue for payment, based on the date in your agreed credit terms.
What are Credit Terms for Aged Debtors?
Credit terms are the period of time a debtor is given to pay the total value of their invoice.
What is the Aged Debtors Report?
The aged debtors report contains each outstanding invoice owed by your customers. The amount for each invoice is split across 30 day periods of time – known as ‘aged buckets’. The aged buckets will cover the last 4 periods – 30 days, 60 days, 90 days, and 90 days or more.
Splitting the outstanding amount across these periods makes it easier to understand how old the debt is, and in turn which debtor to follow-up first.
Aged Debtors Report Example
Below is a simple template we’ll use to explain the Aged Debtors report – generated using Thrive Accounting Software.
In the example, each debtor with outstanding invoices is listed. Take note of the aged bucket each invoice falls under.
Older invoices, such as INV00027, are over 90 days old and would be highest priority for following up on payment from this debtor.
Why is the Aged Debtors Report Important for My Businesses?
If you’re a small-medium sized business owner, it’s crucial you become familiar with the aged debtors report. Here’s two reasons why:
Cashflow Management
Good management of your debtors will help ensure a healthy flow of income for your business, give you more room for financial forecasting, and birds eye view of your business health like with the Company overview dashboard in Thrive.
Identify Bad Debt
By identifying customers who consistently miss payments, you can make better decisions when defining your credit terms, and spot when a customer is at risk of defaulting on their debt.
How to Manually Conduct Debtors Analysis
Several accounting systems, such as Thrive Accounting Software, include a dedicated aged debtors report for making analysis quick and simple. If your system doesn’t include such report, follow these steps:
- Start by gathering a list of all outstanding invoices from your debtors. You can do this by doing a customer statement export from your accounting system.
If want to save time gathering your list of debtors, check out Thrive’s Customer Aged Analysis report – you’ll see a breakdown of each customer and their outstanding invoices automatically.
- Ensure the following information is on your report:
- Invoice number
- Customer Name/Account code
- Date of Invoice
- Credit terms
- Add a column for the last 4 accounting periods. Review the due date for each invoice, and enter the amount in the relevant bucket.
Thrive shows which bucket an invoice belongs to automatically on the Customer Aged Analysis report. - Review the ageing for each customer to determine which customers should be contacted first – start with debt from 90 days or more.
- Go through your customer records to find contact information for each debtor, to begin emailing them customer statements.
Best Practises for Contacting Your Debtors
It may seem daunting to follow up on debt – but you can make the process much simpler by ensuring you follow these best practises:
Confirm debtors contact details is correct
When you begin doing business with your debtors, ensure you have correct contact details for debtors – this is important both for sending invoices to the correct address, and for calling them directly.
Have contact details on hand for emailing & phone calls
Having contact details on hand for each customer drastically speeds up your debt collection process. You can prepare this by printing out your list of contacts to call beforehand, or searching for customers in your accounting system before phoning them.
Thrive Accounting Software makes contacting debtors even simpler by including all the contact details you need on our Customer Aged Analysis Report. With the contact name, phone number and last receipt date, you simply print out the report and get on the phone to leads as you move through the report.
Have your outstanding invoices and amounts ready
While a customer statement run will contain outstanding transactions, some accounting software don’t include the outstanding amount for invoices by default. This can lead to an awkward conversation on the phone when your debtors ask how much is owed for a specific transaction! Always make a note of how much is owed before making contact.
To avoid these situations, consider using Thrive – our Customer Aged Analysis report automatically includes the invoice ageing, showing the outstanding amount for each period. You can simply reference the invoice number while on the phone, and see the amount they owe right beside it.
Download our “Managing Aged Debtors Cheat-Sheet”
Looking to start managing your debtors for the first time, or using the aged debtors report? Check out our free cheat sheet containing the top 10 tips for managing your debtors today.
Download our Free Guide:
Take Control of your Aged Debtors with Thrive
Manually creating your aged debtors report is a great start, but why not take it one step further? With Thrive’s dedicated sales and invoicing module, you can take full control of managing your debtors.
Our customer aged analysis report helps you stay on top of which debtors are behind on payments. View a summary of the debtors and amounts owed for a helicopter view of your ageing, or see the detailed report to drill into each customer’s ageing or outstanding transactions.
Sending out statements is easy with our Customer Statements Run. Select one or more customers and email a statement of accounts containing outstanding transactions due for payment.
Thrive also has customer credit control, so you can set a credit limit and choose the number of credit days they’re allowed. You can even assign a credit status so you’ll see credit warnings on any new transactions for a debtor behind on payments, to ensure credit quality is maintained.
Lastly, on any sales transaction, you can view a summary aged debtor report for the customer using transaction analysis. Additionally, you can view the stock details for a product.
Combined with automatic stock control by updating levels once you’ve posted an invoice, Thrive will supercharge your sales productivity.
Request a demo today and see how Thrive accounting software can transform your sales and debt management, streamline your operations, and boost your business’s efficiency. The Thrive team will be delighted to showcase all its features and benefits that make Thrive the ultimate solution for efficient debtors aged analysis.
