The Aging Schedule Calculator categorizes outstanding receivables based on the length of time they have been outstanding. This systematic approach helps businesses understand their financial health regarding customer payments and identifies potential issues with credit terms and collections processes.
Formula of Aging Schedule Calculator
The aging schedule organizes receivables into time frames that reflect the length of time an invoice has been outstanding. Here’s how it is typically calculated:
Determine the Age of Each Invoice
Invoice Age = Current Date - Invoice Date
Categorize Each Invoice
- Current (0 to 30 days):
- Current Amount = Sum of Invoice Amount for 0 <= Invoice Age <= 30
- 1 to 30 Days Overdue:
- 1 to 30 Days Overdue Amount = Sum of Invoice Amount for 31 <= Invoice Age <= 60
- 31 to 60 Days Overdue:
- 31 to 60 Days Overdue Amount = Sum of Invoice Amount for 61 <= Invoice Age <= 90
- 61 to 90 Days Overdue:
- 61 to 90 Days Overdue Amount = Sum of Invoice Amount for 91 <= Invoice Age <= 120
- More than 90 Days Overdue:
- More than 90 Days Overdue Amount = Sum of Invoice Amount for Invoice Age > 120
Total Receivables
Total Receivables = Current Amount + 1 to 30 Days Overdue Amount + 31 to 60 Days Overdue Amount + 61 to 90 Days Overdue Amount + More than 90 Days Overdue Amount
Table for General Terms
To aid understanding, here is a table of terms related to the Aging Schedule Calculator:
| Term | Definition |
|---|---|
| Invoice Age | The number of days an invoice has been outstanding. |
| Current Amount | Total of invoices that are up to 30 days old. |
| Days Overdue | Categories that define how long invoices have been unpaid past their due date. |
| Total Receivables | The sum of all receivables across all categories. |
Example of Aging Schedule Calculator
Consider a company that has several outstanding invoices:
- Invoice 1: $500, 20 days overdue
- Invoice 2: $1,000, 40 days overdue
- Invoice 3: $1,500, 70 days overdue
- Invoice 4: $2,000, 120 days overdue
Using the Aging Schedule Calculator, the receivables would be categorized as follows:
- Current Amount: $0 (No current invoices)
- 1 to 30 Days Overdue Amount: $500
- 31 to 60 Days Overdue Amount: $1,000
- 61 to 90 Days Overdue Amount: $1,500
- More than 90 Days Overdue Amount: $2,000
Total Receivables = $0 + $500 + $1,000 + $1,500 + $2,000 = $5,000
Most Common FAQs
It helps businesses manage their cash flow by identifying overdue payments and assessing the effectiveness of their credit and collection policies.
It is best practice to update the aging schedule regularly, typically at the end of each accounting period, to keep track of changes in receivables.
Yes, by analyzing patterns in overdue payments, businesses can forecast future cash flows and adjust their credit policies accordingly.