How to Prepare Your AR Aging Report | Free Template & Automation Tips

If a company’s receivables are being collected slower than normal, this can signal a warning that the business may be in a downturn or that the company is taking on greater credit risk in its sales process.

You need to know when you can wait for payment before it leads to a loss.

An AR aging report is used by collections teams to identify such irregularities.

They aren't just about chasing dues. They're about seeing credit risk early, preventing write-offs, and streamlining collections. In this guide, we'll break down how to read, build, and automate AR aging reports — and when it's time to scale beyond spreadsheets.

What is AR aging in accounting?

AR aging is your financial early warning system. It tells you how well your customers are meeting payment terms, how long invoices have remained unpaid, and whether your collections system is actually working (or if it's quietly losing you cash).

Let’s break down the AR aging process:

1. Compile open invoices

Begin by gathering data from all outstanding invoices from your accounting system.

2. Set time intervals for categorization

Determine the aging buckets that best suit your business needs. They’re typically broken down like:

• 0 to 30 days: Current (still within payment terms)
• 31 to 60 days: Slightly overdue
• 61 to 90 days: At-risk
• 90+ days: High-risk or potentially uncollectible
  

3. Categorize invoices by the length of time they have been unpaid

Place each invoice into the appropriate bucket based on how many days have passed since the due date.

4. Calculate customer balances for each category

Total outstanding amounts by customers across all categories and spot risky accounts quickly.

5. Calculate total balances for each category

To determine how much of your AR is at risk, add up the total amount for each aging category across all customers.

6. Estimate bad debts

 Use past data to estimate the likelihood of collecting receivables in each aging category.

For example, you may determine that:

• 1% of invoices in the 0–30 days category may be uncollectible
• 5% in the 31–60 days category
• 15% in the 61–90 days category
• 50% in the over 90 days category

Apply these percentages to the totals in each category to estimate potential bad debts.

What is an accounts receivable aging report?

An AR aging report is a snapshot of unpaid invoices grouped by how long they’ve been overdue. It helps arrive at key AR KPIs, like:

Here’s a glossary of terms used in the AR aging report:

When is an accounts receivable aging report used?

AR aging reports are widely used to streamline collections. Having said that, they also play a role in risk management, forecasting, and financial reporting.

Let's look at common instances when an AR aging report is used:

• Collections management

Should the collections team send reminders, offer discounts, or escalate the account to the collections team for recovery? The AR aging report informs that call.

AR aging reports categorize overdue balances into time buckets, enabling collections teams to prioritize accounts based on payment risk.

Take the case of a wholesale supplier working with dozens of retail accounts. Their finance team noticed that one chain had several unpaid invoices that were over 90 days past due. The AR aging report helped flag the delay early, leading to a freeze on new shipments until partial payment is made. Without the report, the risk would’ve compounded silently. 

• Allowance for bad debt or Current Expected Credit Loss (CECL) compliance

Under CECL rules, companies must estimate expected credit losses from the start, not just when a customer defaults. 

Consider a mid-market SaaS company. When calculating their allowance for doubtful accounts, they layer aging data with other risk inputs like:

• Industry default rates
• Macroeconomic stress (like inflation)
• Customer-level signals (like layoffs or low sales)

One of their major enterprise clients started slipping from 30-day payments into the 90+ day bucket after losing key contracts. That was enough to prompt them to set aside more cash in case the invoice was never paid.

• Credit risk monitoring

With 50% of US B2B invoices now overdue and bad debt averaging 8%, reviewing the aging report weekly will get a real-time view of credit risk. For customers who consistently pay late, you can consider rethinking credit terms, moving them to a prepay option, or escalating the account to collections.

How do you calculate the age of accounts receivable?

Calculating the age of AR will tell you how well a business is managing its receivables.

The formula to calculate AR aging days is:

AR Aging Days = (Avg. AR x 360 Days) ÷ Total Credit Sales

Average AR = (Beginning AR + Ending AR) ÷ 2

360 is used as a standard number of days in a financial year. 

A shorter period of AR aging days is ideal, while a longer period may suggest issues with credit policies or collections processes.

Example: A CRM company has 30-day payment terms. Here’s their financial snapshot:

Step 1:

Average AR = (750,000 + 900,000) ÷ 2 = 825,000

Step 2:

AR Aging Days = (825,000 × 360) ÷ 8,000,000 = 37.1 days

Insight:

They collect payments in about 37 days—slightly longer than their 30-day terms. That’s a signal to tighten follow-ups or revisit customer credit policies.

How do you create an accounts receivable aging schedule in Excel?

1. Prepare your data

Make sure your spreadsheet has:

• Customer Name
• Invoice Number
• Invoice Date
• Due Date
• Invoice Amount

2. Add days past due

Next up, insert a column for “Days Past Due” and use the below formula to calculate how late the invoice is:

=TODAY() - [Due Date]

3. Create aging buckets

Classify invoices into groups. 

Companies with shorter payment terms may want to use a 15-day interval instead to monitor their receivables closely.

Use nested IF statements to assign each invoice to the correct bucket based on “Days Past Due.”

4. Build a pivot table

• Add “Customer Name” to Rows
• Add the “Aging Buckets” to Columns
• Add “Invoice Amount” to Value and set to SUM

Here’s how the pivot table will look:

💡Add more intelligence to your AR aging report

Consider the following points to add context and turn your AR aging report into a decision-making tool:

• Customer risk tiers: Flag high-risk accounts based on patterns identified or past data
• Payment terms: Highlight accounts slipping outside agreed terms
• Notes on customer interactions: Include notes on previous collections efforts and communications
• Payment behavior: Identify repeat offenders or improving trends

Download this spreadsheet template to create your AR aging report

Download our AR aging report template to generate your Excel report and calculate five essential AR metrics.

How to read an AR aging report? (4-step walkthrough)

Once your AR aging report is ready, the next step is knowing how to read it and act on what it’s telling you.

Here’s a 4-step guide to make your AR aging analysis more actionable:

Step 1: Understand the report’s layout

Most aging reports categorize receivables by organization, department, customer, or invoice level. As seen earlier, columns in the report show — what’s owed to your business, how late it is, and where it falls in your aging timeline.

You can use color coding or conditional formatting in Excel to visually isolate problem areas.

Step 2: Identify high-risk customers

Filter your AR aging report to see:

• Which customers have the most outstanding balances?
• Are any customers repeatedly showing up in the 91+ day column?
• Do these delays align with recent credit term changes or disputes?
• Are specific business units consistently underperforming?

Answering these questions helps you uncover the root causes — and whether it’s time to update your credit policy, escalate collections, or both.

Step 3: Use the invoice-level tab for audits

Many reports include a "Total Open Invoices" tab, organized by financial document number.

Use it to:

• Audit overdue balances
• Cross-check invoices against payments or adjustments
• Identify recurring issues like billing disputes or missed approvals

Step 4: Drill into the invoice detail

If you’re using a modern AR system like Zenskar, your report will include clickable invoice links, using which you can:

• Click any invoice number to view line-item detail
• See chart codes, descriptions, disputes, payment history, and status
• Justify reserve allocations or customer credit decisions using real data

✅ Bonus tip:

Use this drill-down capability during:

• Monthly close
• Credit limit reviews
• Quarterly reserve planning

It turns your aging report into a strategic control center — not just a tracking tool.

Common mistakes in AR aging reports (and how to fix them)

Even the best AR teams can misread the story their aging report is telling them—simply because of how the report is structured or interpreted.

Here are the most common mistakes we see and how to avoid them:

❌ Using static aging buckets 

Many companies use fixed buckets, such as 30, 60, or 90 days. But if your customers routinely pay on day 45, a 30-day cutoff wrongly flags healthy accounts as delinquent.

✅ Fix:

Customize your aging buckets based on real payment patterns. For example, use 0–45 days if that’s your norm.

❌ Treating all customers the same

A startup paying sporadically isn’t the same as a large enterprise with monthly invoicing cycles. Using the same follow-up cadence wastes time—and increases risk.

✅ Fix:

Segment your report by customer cohort (e.g., SMB vs. enterprise) and apply tailored collections strategies.

❌ Keeping overdue invoices in “friendly reminder” mode too long

Most recoverable B2B payments happen within the first 60 days. After that, recovery rates drop.

✅ Fix:

Set hard rules for escalation. Don’t wait until day 90 to act—trigger collections workflows earlier based on bucket or DSO thresholds.

How to reduce AR aging and improve cash flow

Lowering AR aging is one of the fastest ways to improve liquidity—without raising new capital or cutting costs.

Here’s how top finance teams reduce overdue receivables:

1. Set clear credit terms upfront

Define and communicate terms before onboarding the customer—net 30, 45, or custom terms—so there’s no confusion down the line.

2. Automate invoicing and reminders

Use tools like Zenskar to send invoices and follow-ups automatically based on invoice status and aging buckets.

3. Review aging reports weekly

Frequent reviews help you catch issues early, reassign collection priorities, and improve visibility across teams.

4. Prioritize high-value, high-risk accounts

Sort your AR aging report by value and days overdue. Focus first on large invoices stuck in the 61–90 or 91+ day range.

5. Offer early payment incentives

Discounts (e.g., 2% off if paid within 10 days) can encourage faster payments—especially with SMBs.

6. Provide flexible payment options

The fewer barriers you create—ACH, credit card, auto-pay—the easier it is for customers to pay on time.

Real-world signals to automate AR aging

Spreadsheets can only take you so far. As your invoice volume grows, manual aging reports start to break down—slowing collections, increasing errors, and clouding visibility.

Here are the most common signs it's time to automate your AR aging process:

• You’re managing 200+ invoices per month

Research reveals that 82% of finance teams feel overwhelmed with a high load of invoices. Manually reconciling 200+ invoices is a slow, time-consuming, and error-prone process.

• You operate across different currencies and geographies

With automation, each invoice (regardless of currency) is converted, categorized, and synced to your reports in real time.

• You face challenges in reconciling AR with General Ledger (GL)

If you're seeing frequent gaps between your AR and GL, that’s a sign to use an automated accounting solution and spend less time reconciling them.

• Your monthly close takes 10+ days

Traditionally, closing the books could drag past the 10-day mark. Automating AR aging reports can help you close faster with fewer surprises.

• You’re bringing in over $10M in revenue

$10M+ in revenue is a significant milestone, but it comes with new AR headaches. This explains why 93% of mid-sized companies plan to automate accounts receivable.

Why should you automate AR?

• Your billing and revenue data is fragmented across different systems.
• It’s challenging to track and reduce overdue receivables.
• There is a mismatch between credit terms and periods of the aging report, which can provide misleading financial information.

Why do finance teams choose Zenskar for AR automation?

Traditional accounts receivable processes are slow, error-prone, and resource-heavy. Zenskar changes that.

Here’s how Zenskar helps you get paid faster, reconcile cleaner, and close sooner.

• Instant visibility into aging by customer or contract. 
• Cohort breakdowns to identify aging trends and high-risk buckets.
• Predictive alerts to proactively manage credit and overdue risk.
• Auto-prioritized follow-ups.
• Smart reminders and escalations based on invoice status and the number of days overdue.
• Integrated with your CRM, billing, and GL to keep everything in sync. 

Zenskar does more than match payments. It ties your profit and loss (P&L), balance sheet, and cash flows together.

Real-world impact

Pontera’s finance team consolidated billing, collections, and reconciliation into one platform. They eliminated payment mismatches, shortened their close cycle by more than 200 hours per quarter, and gained instant visibility into receivables and revenue.

💡Read the full case study →

👉 Ready to simplify your AR operations? Get started with Zenskar today.