You may have heard of the term aged creditors report or aged debtors report, and wondered what they are and whether these reports are needed in your business.
These reports can be beneficial for any business, but their necessity depends on your business’s financial position and its credit and debt behaviour towards clients and suppliers. Additionally, having aged creditors and debtors reports on file can play a big role in your business’s funding readiness.
In this article, we’ll have a look at these two reports, how they differ and how they can affect you when you apply for funding.
What are Ageing Periods?
Before we dive into the two different reports, it’s crucial that you understand ageing periods. The term aged in this instance is in the name. It refers to the ageing of the invoices. The longer an invoice remains unpaid, the older it becomes.
Ageing periods are typically broken down into two different time categories. Namely, days or by month. Here’s how ageing periods are displayed by days:
- Not Yet Due: Invoices that are still within their payment terms.
- <30 Days: Payments are overdue by up to 30 days.
- <60 Days: Payments that are between 31 and 60 days overdue.
- <90 Days: Payments that are outstanding for 61 to 90 days.
- <120 Days: Invoices overdue by 91 to 120 days.
- Older: Transactions unpaid for more than 120 days.
Here’s how ageing periods are displayed by month:
- Current: Invoices that are still within their payment terms.
- 1 Month: Payments that are overdue by up to one month.
- 2 Months: Payments that are overdue by up to two months.
- 3 Months: Payments that are overdue by up to three months.
- Older: Payments that are overdue for more than three months.
Aged Creditors Report
An aged creditor compiles unpaid invoices issued to the business from suppliers. The report compiled by an aged creditor gives the business a view of the outstanding debts it has, making it easy for the business to keep up with its debts.
Information outlined in a creditor’s report includes overdue invoices, allowing the business to prioritise the most urgent debt. It also groups together according to outstanding debts, which are typically 30, 60, or 90 days.
Aged Debtors Report
An aged debtor operates to put together unpaid invoices and to provide the details of the amount owed, along with the customers who have not paid the invoices.
When an aged debtor compiles a report, it makes it easier for you as a business to have a clear view of the unpaid invoices and which customers have not paid. These reports can be essential in helping small businesses effectively manage their invoices.
An aged debtors report can display in-depth information regarding the owed amount, such as the invoice number and when unpaid invoices are overdue, allowing you to easily follow up on customers who have overdue outstanding payments.
How Does Your Aged Creditors and Debtors Report Affect Funding?
Your business financials are an essential part in the funding process. Your aged creditor and debtor reports may be requested for various types of funding, as they provide funders with insight into your business’s cash flow and your credit and debt habits.
This information is crucial in helping funders assess the risk of funding your business. However, your aged creditor and debtor reports are especially important when applying for invoice discounting.
What is Invoice Discounting?
Invoice discounting gives businesses the opportunity to access funds that are tied up in unpaid invoices. If you have government and private invoices, you can apply through funders like Sourcefin. How it works is that the funder will follow up with your client to ensure that the invoice has been approved, allowing you to get paid once you’ve delivered the product or service.
Get Your Business Credit and Debit Records in Order
Now that you have the above-mentioned information, you’re well on your way to getting your credit and debit records in order. Through tools like Sage, you can get your aged creditors and debtors reports.
These reports not only help you track your business’s credit and debt but also increase your chances of getting approved for funding.
