Accounts Receivable Aging Template: Buckets, Report, and Collections Workflow

It is a list of every unpaid customer invoice, grouped into buckets by how long each has been outstanding: current (not yet due), 1-30 days past due, 31-60, 61-90, and over 90. It shows who owes you money, how much, and how overdue it is, which makes it the primary tool for managing collections and spotting cash flow problems early.

The standard five: current, 1-30, 31-60, 61-90, and over 90 days past due. Measure age from the due date, not the invoice date, so the report reflects genuine lateness. Businesses with very short terms sometimes add a 1-15 day bucket, but the standard five work for most small businesses and match what lenders expect to see.

Weekly for the person doing collections, monthly at minimum for the owner. AR aging belongs in the same weekly rhythm as the cash flow forecast, because next week's collections are this week's forecast inputs. If the report is only run at year-end for the tax return, collections are already failing.

There is no universal rule, but a common working target is to keep the large majority of AR current or under 30 days past due, and to treat anything past 60 as an exception requiring a named action. The more useful discipline is trend: if the over-60 share grows two months in a row, something in billing or collections is breaking.

Days sales outstanding measures the average number of days it takes to collect after billing: accounts receivable divided by revenue for a period, times the days in the period. If your terms are net 30 and your DSO is 55, your customers are using you as a free lender for an extra 25 days. Each day of DSO is roughly a day of revenue trapped on the balance sheet instead of in the bank.

For your books, yes: recording bad debt keeps AR honest. The tax answer depends on your accounting method. Accrual-basis businesses that already recognized the income can generally deduct a genuinely worthless receivable as a bad debt. Cash-basis businesses usually cannot deduct an unpaid invoice, because the income was never recognized in the first place. Confirm treatment with your CPA before filing.

Both can work, and both need to be in your written terms before the sale. Late fees mostly work as leverage in collections conversations. Early-payment discounts (for example, a small discount for paying within 10 days) genuinely accelerate cash but cost real margin, so price them deliberately. The cheapest fix is usually more mundane: invoice immediately, accept electronic payment, and follow up on schedule.

Triage it once, then work the list. Sort by balance, contact the ten largest first, and offer a concrete choice: pay in full, start a documented payment plan, or face escalation. Convert vague promises into dated commitments in writing. Then fix the intake side (deposits, progress billing, card on file) so the bucket does not refill behind you.

Any time work takes weeks to deliver, any time a customer is new with no payment history, and always after a customer has been through the collections ladder once. Deposits, progress billing, and card-on-file authorization prevent aging problems more effectively than any collections script.

One named person, with a schedule and scripts, and it usually should not be the owner for routine steps. A bookkeeper or office manager can run everything through the 60-day step; the owner steps in for the owner-to-owner call and the final decisions. Many businesses fold this into an outsourced bookkeeping engagement so the follow-up actually happens every week.