An aging schedule is a table containing amounts of the company’s bills or expected receivables that are categorized with the consideration of the due dates on each bill or invoice to determine those that are due and are already past due. This schedule works somewhat similarly with a daily schedule or a work schedule. The difference lies in how these amounts are divided on the aging schedule.
The use of an aging schedule lies in that it monitors how effectively the company pays or collects the accounts payable and accounts receivable of the business. The following information will provide you the steps and the tips on how to set up and analyze an aging schedule with various template samples as your reference.
Setting Up an Aging Schedule
With the schedule templates in Excel format as your reference, the following are the ways to set up an aging schedule for your accounts payable or accounts receivable:
- Identify the due dates of each account that is payable or receivable by the business. The first thing you need to do is to have a list of all the customers or liabilities you currently have, which includes:
- the name,
- the amount, and
- the due date.
- Set up a period classification on the aging schedule. On the aging schedule, you are to put the names of the accounts on the leftmost side of the table. The column headings will contain the payment period divisions of the aging schedule. The most common division is the use of a 30 day payment term categorized as:
- 0 to 30 days
- 31 to 60 days
- 61 to 90 days
- Over 90 days
- Arrange the amounts in accordance with their respective due dates. As you may have noticed on the sample schedule templates of this website, the arrangement of the amounts depends on when they are due. A calculation on the probability of accounts becoming doubtful is made to determine the percentage of doubtful accounts for each payment period division.
Analyzing an Aging Schedule
Here is a guide for you to analyze an aging schedule with samples shown on the sample schedule templates and printable schedule templates on this website:
- Identify the customers or the credit payable you need to give attention to. An aging schedule can give you an idea of the customers that have a number of overdue accounts allowing you to take the necessary procedure to collect these overdue amounts. In relation to your credit payable, you can define the liabilities you need to pay for that specific period.
- Determine the doubtful accounts on your accounts receivable. Since the aging schedule is categorized with the divisions on payment periods of the accounts, you can determine the accounts to be collected and those accounts that are doubtful, which includes over 90 day accounts. Collection policies can be improved by the company to avoid multiple overdue accounts.
An aging schedule is a helpful tool in keeping track of receivables and payable of a business. Through the schedule, the management knows where to focus efforts on collection and improvements on credit and on collection policies of the business.