Aging Accounts Receivable

aging accounts receivable
  • The aging accounts receivable reports the collectibles the company is supposed to have and
  • These collectibles are debts owed to the company by the patient-client
  • This aids the AR experts to identify open invoices that are due and need to be settled immediately to maintain business cash flow.
  • Bad debts are risks that pose a threat to financial health due to unclaimed collectibles in every business.

An aging accounts receivable is a document showing all the unpaid customer invoices. It is for identifying which clients have an outstanding balance and to see trends in the progress of the collection process.

Importance Of An Aging Accounts Receivable

Account receivables are generally important on the part of business owners to keep tabs on the payments of their clients. This will ensure that the business is continuously moving and that every effort in running it is properly compensated. Some clients may pay on time but others may seem to meet a bump on the road causing late payments and this is not good news for the business owners. ARs will show dates of transactions and will help the account receivable experts to identify which invoices have lapsed payments already.

An aging account receivable, from the name itself, will show the aging ones and continue to do so and a report of these will facilitate actions to maintain business cash flow. To do this, first, the expert or analyst should review the invoices and list them accordingly in the order that they want, whether from the oldest to the latest or vice versa. After a list has been generated, they can now see which ones are past due and this will make the collection process easier. Some may catch their attention because of how late payment is or how much the account receivable is. They can now see in totality how much money the company is owed. In the revenue cycle management, this happens when a service is not under the coverage of the paying insurance companies but has completed an encounter already with the physician. The medical billing process may have done its part smoothly but these situations are unavoidable sometimes no matter how keen and detail-oriented they are.

Other Uses of An Aging Account Receivable Reports

An aging account receivable report is used to estimate the severity of some unpaid debts. With one look, the analyst can prioritize the invoices that need more attention than the others. It can also be used to call help to third-party collection agencies and in the worst-case scenarios, to take legal action against clients. Isolated cases usually happen on the client’s end but if a repeated case is seen in most patient clients, there’s probably something wrong in the credit policy of the company.

Aging Account Receivable As A Tool Of Management

As business owners, a good relationship with clients is always maintained to keep a good company reputation. However, if the client chronically misses his payments and is in some way becoming a burden to the business, then he may prove himself to be a credit risk and appropriate actions can be decided on. Delinquent accounts can also be tracked with AR and can estimate a loss for the business which is something no owners wish to happen.

Calculation Of The Account Receivable Age

Once a report has been generated, the data are sorted as to which are current, and which are due in 30 months, 60 months, etc. The company has its own percentage computation depending on the length of time an account has been due.

Bad Debts

Bad debts impose a problem for any business owner. These are supposedly collectibles but are no longer so due to certain circumstances and leave no choice to business owners but to charge off. These are always a risk with every patient encounter and an aging account receivable report is a tool that can be utilized to avoid these events.

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