Accounts payable aging report definition

/

What is the Accounts Payable Aging Report?

The accounts payable aging report categorizes payables to suppliers based on time buckets. The report is typically set up with 30-day time buckets. This approach results in a report where each successive column lists supplier invoices that are 0 to 30 days old, 31 to 60 days old, 61 to 90 days old, and older than 90 days. The intent of the report is to give the user a visual aid in determining which invoices are overdue for payment. It is especially useful when a business is short on cash, and so needs to monitor which payables are not being paid on time.

Who Uses the Accounts Payable Aging Report?

There are two main users of the accounts payable aging report. They are as follows:

  • Auditors. The aging report is sometimes used by a company's outside auditors as a listing of payables due as of the end of the period being audited. However, this report is only useful to them if its total matches the ending accounts payable balance in the general ledger. Alternatively, they can examine the report to see if any supplier invoices are well overdue for payment, and make inquiries as to why this is the case.

  • Payables staff. The main users of the aging report are the payables staff. These employees want to know if any supplier invoices are overdue for payment, and can peruse the report for evidence of such invoices. This is also a good place to look for stray supplier credits that have not yet been applied to open invoices.

Problems with the Accounts Payable Aging

A key flaw in this report is that it assumes all invoices are due for payment in 30 days. In reality, some invoices may be due on receipt, in 60 days, or almost anywhere in between. Consequently, an invoice listed on the aging report as current might actually be overdue for payment, while an invoice listed in the 31 to 60 days time bucket may not yet actually be payable.

Related AccountingTools Courses

Optimal Accounting for Payables

Payables Management

Accounts Payable Aging Best Practices

For the report to be effective, it should be periodically cleaned up, so that stray debits and credits are removed from the report. Otherwise, it tends to become cluttered over time and therefore more difficult to read. Also, an alternative solution is to use a report generated by the accounting system, which lists only those supplier invoices that are nearly due or overdue for payment, based on invoice dates and supplier payment terms.