Accounts Receivable Aging Reports and Factoring

The accounts receivable aging report is one of the most important reports that a factoring company asks for when processing your application. The factoring company uses this aging report to determine the size and quality of your invoice portfolio. It helps determine which terms – such as invoice factoring rates and factoring advances – will be offered.

The most common version of this report simply lists customers in the first column and the amounts that they owe in the additional columns. The amounts owed are then categorized to reflect how long specific amounts have been outstanding.

The second column is usually called Current and includes invoices that are current within the billing period. The third column shows invoices that are past current by “1 – 30” days. The fourth column shows invoices that are past current by “31 – 60” days, and so on.

Here is a sample accounts receivable aging report:

accounts receivable aging report

The Client column of the report gives factoring companies an idea of how many customers you have. The other columns identify your customers’ amounts owed and payment performance.

How do factoring companies use this report?

Factoring companies also use this report to flag potential issues. For example, a customer with amounts in all columns, including the “90+” (more than 90 days), may either be a slow payer or be involved in a possible dispute.

However, factoring companies do not rely solely in this report to determine the quality and diversity of your invoices. They also run commercial credit checks on your customers to determine both their credit quality and how much credit to offer them. The combination of this report and the commercial credit checks (along with other variables) plays a major role in determining your factoring rates and terms.

How to get an aging report

In most cases, the accounts receivable aging report is generated automatically from your accounting system. Obviously, keeping your accounting system up-to-date is important because it helps identify customers who may be falling behind on payments, but it’s also very important if you are looking for factoring. As opposed to a conventional business loan, in which the lending institution views all your assets as potential collateral, the main collateral for receivables factoring transactions are your open invoices. For this reason, providing your factor with an accurate accounts receivable aging report is critical to the success of the transaction.