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Accounts Receivable Aging Explained for Small Business Owners
Understand AR aging reports, current and overdue invoice buckets, cash flow impact, and a monthly collection checklist for service businesses.
Short answer
Accounts receivable aging shows unpaid customer invoices grouped by age, often current, 30, 60, and 90+ days. It helps owners see which customers owe money and how overdue the invoices are.
Checklist
- Review current, 30, 60, and 90+ day buckets.
- Identify the largest overdue customers.
- Check whether payments were applied correctly.
- Follow up on overdue invoices.
- Review invoice and payment workflow monthly.
Common mistakes
- Assuming all unpaid invoices will turn into cash soon.
- Not matching customer payments to invoices.
- Leaving old balances open after payments were received.
- Ignoring overdue invoices until cash gets tight.
Examples for service businesses
- A contractor with progress invoices should review overdue balances before starting more work.
- A landscaping company with monthly maintenance customers should watch recurring unpaid invoices.
- A home-service company should compare deposits and final invoices to AR aging.
Why AR aging matters
Revenue does not help cash flow if customers have not paid. AR aging helps owners act before unpaid invoices turn into a cash crunch.
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