AR Aging Report: How to Read It and What to Do With Each Bucket

An AR aging report tells you who owes you money and how late they are, yet most owners glance at the total and close it. Used properly, it is your weekly collections to-do list. This guide shows you how to read an aging report, what to do with each bucket, which red flags to catch early and how to build the report in QuickBooks, Xero or a spreadsheet.

What an AR aging report is

An accounts receivable aging report lists every open customer invoice and sorts it by how long it has been unpaid. Each customer gets a row, and the columns, called buckets, group the balance by age. The grand total should match the receivables balance on your balance sheet. If it doesn’t, the usual suspects are unapplied payments or old credits.

The report answers three questions at once: how much you are owed, by whom, and how late it is. A $100,000 receivables balance that is mostly not yet due is healthy. The same $100,000 with a third of it past 60 days is a cash problem that hasn’t reached your bank account yet. It is also a common one: the QuickBooks Small Business Late Payments Report 2026 found that 59% of US small businesses have invoices more than 30 days overdue, up from 47% a year earlier.

The standard aging buckets

• Current: not yet due. On net-30 terms, an invoice sent 20 days ago is current.
• 1-30 days past due: late, often because of a missing approval, a wrong PO number or a slow payment run.
• 31-60 days: something is wrong: a dispute, a lost invoice or a customer short on cash.
• 61-90 days: serious. Every week here makes the invoice harder to collect.
• 90+ days: at risk. Each invoice here is a decision to make, not a balance to watch.

Most reports age from the due date, some from the invoice date. Check yours, pick one method and keep it, or month-to-month comparisons mean nothing.

How to read an aging report: a worked example

Here is a simplified aging summary for a fictional distributor that sells on net-30 terms. The numbers are an example, not data from a real company.

Read it in this order:

1. The bottom row. $59,150 of $101,600 is current, so 58% of receivables is not yet due and 42% is late. That split is the first number to track week to week.
2. Each customer row. Customers A and D are fine: mostly current, and the late part is recent.
3. Balances spread over several buckets. Customer B owes money in current, 1-30 and 31-60. That usually means a customer who pays, but a little later every month.
4. Rows with nothing current. Customer C has no current balance and $6,950 over 90 days. Either you stopped selling to them, or one old problem invoice is holding up everything behind it. Both need a conversation this week.
5. Credits. Customer E shows a $1,200 credit in the 90+ column, probably an old credit memo or an overpayment nobody applied. It makes the 90+ total read $5,750 when the invoices actually over 90 days add up to $6,950.

Five minutes, and you have a call list: Customer C, then Customer B, then clean up Customer E.

What to do with each bucket

The report only helps if each bucket triggers a specific action. Here is a simple playbook.

Current

For any invoice large enough to matter, confirm the customer received it, with the right PO number, and that it is approved. Send a short reminder about five days before the due date. Many “late” invoices are simply invoices nobody approved in time.

1-30 days past due

Send a polite reminder in the first few days with the invoice attached. If nothing happens by around day 10, call accounts payable and ask one question: when is this scheduled to be paid? Write down the date and the name of the person who gave it.

31-60 days past due

Call the person who approved the purchase, not only accounts payable, and ask whether there is a problem with the invoice. If there is a dispute, get the details and fix it fast. If there is no dispute and still no date, apply your credit policy, which may mean holding new orders until the account is current.

61-90 days past due

This is the owner-to-owner stage. A call from you, followed by an email summarizing what was agreed, carries weight. Ask for a firm payment date or a written payment plan, and keep new credit on hold.

90+ days past due

Decide what happens to each invoice: a payment plan, a negotiated settlement, a formal collection step or a write-off. For formal collection, liens, small claims or a lawsuit, talk to an attorney or a licensed collection agency, because the rules vary by state and province. In construction, lien and prompt payment rights often depend on notice deadlines, so ask early rather than at day 120. Write-offs are a question for your accountant.

Red flags to look for

The warning signs show up when you compare this week’s report with last month’s.

• One customer drifting. A customer who always sat in 1-30 and now has balances in 31-60 is telling you something: a new AP clerk, a cash squeeze or a quiet dispute. Call before the next invoice ages, and warn whoever approves their orders.
• A growing 90+ bucket. If it grows month after month, old problems are piling up faster than they get resolved. Give every invoice in that column a named owner and a next step.
• Unapplied cash. Money received but not matched to an invoice. The invoice still shows as open, so you chase a customer who already paid. Clear it before anyone picks up the phone.
• Credits and short payments. Old credit memos and overpayments hide the real picture, as Customer E shows. Short payments ($4,600 paid on a $5,000 invoice) leave small balances that age forever. Each is a dispute to resolve or a balance to write off with approval.

Three KPIs to track with your aging report

Bucket totals show where money is stuck. These three numbers show whether things are improving.

Percentage current

Current balance divided by total receivables. In the example, $59,150 ÷ $101,600 = 58%. A rising percentage means invoices are getting paid before they go late.

DSO (days sales outstanding)

DSO is the average number of days it takes to turn a credit sale into cash:

DSO = accounts receivable ÷ credit sales for the period × number of days in the period

Say the distributor made $270,000 of credit sales in the last 90 days. Its DSO is $101,600 ÷ $270,000 × 90, about 34 days: on net-30 terms, customers pay roughly four days late on average. Sounds fine, but Customer C’s 90+ balance is hiding inside that average. Read DSO next to the aging report, never instead of it. You can run your own numbers with our DSO calculator.

CEI (collection effectiveness index)

CEI measures how much of what you could have collected in a month you actually collected:

1. Collectible = beginning receivables + credit sales for the month.
2. Collected = collectible minus ending total receivables.
3. Could have been collected = collectible minus ending current receivables.

CEI = collected ÷ could have been collected × 100

Worked example: the distributor started the month with $95,000 of receivables, invoiced $92,000 on credit and ended with the $101,600 above, of which $59,150 is current. Collectible is $187,000. Collected is $187,000 minus $101,600, or $85,400. Could have been collected is $187,000 minus $59,150, or $127,850. CEI is $85,400 ÷ $127,850, about 67%: a third of what came due was not collected. A CEI that climbs month after month shows your follow-up is working, often before DSO moves.

How often to run it, who sees it and how to build it

Run the aging every week. Monthly is too slow: an invoice that went late on the 2nd sits four weeks without a call. Clear unapplied cash first, work the list, and save a month-end copy for trends.

The person doing follow-up needs the full detail. The owner needs the totals, the three KPIs and the accounts that need a decision. Whoever approves orders should know which accounts are drifting. Your accountant, and your lender if you have a line of credit, may want the month-end version.

QuickBooks or Xero vs a spreadsheet

In QuickBooks Online, the A/R Aging Summary gives one line per customer and the A/R Aging Detail lists every invoice. In Xero, the equivalents are the Aged Receivables Summary and Detail. Both are accurate as long as payments are applied to the right invoices.

What they don’t hold well is the story behind each balance: who you spoke to, what they promised, which invoice is disputed. That is where a spreadsheet earns its place. Export open invoices (customer, invoice number, invoice date, due date, balance), add a “days past due” column that subtracts the due date from the report date, and bucket each line:

=IFS(E2<=0,"Current",E2<=30,"1-30",E2<=60,"31-60",E2<=90,"61-90",TRUE,"90+")

A pivot table by customer gives you the summary. Add columns for last contact, promised date and dispute notes, and the sheet doubles as your follow-up log. The catch: it goes stale the moment you export it, so rebuild it weekly. If you’d rather not start from a blank sheet, the free toolkit includes an Excel aging report template with the buckets, formulas and notes columns ready.

If the report shows more follow-up than your team has time for, see how our invoice follow-up service and weekly AR reporting handle it.

FAQ