An aged accounts payable report is a management tool to monitor the age of the outstanding payables from supplier or vendor invoices. The report is sometimes referred to as an aged creditors report or simply an aged payables report.
The report allows early action to be taken to ensure good trade credit terms are maintained with suppliers. Additionally it ensures invoices are paid at the appropriate time, and early settlement discounts are taken. Furthermore the aged accounts payable report can be used to help predict cash flow requirements for future accounting periods.
Aged Accounts Payable Report Sample
The schedule of accounts payable is produced by analyzing vendor invoices into several different age classifications. The classifications are based on the number of days the invoice is past its due date.
To illustrate suppose an invoice is unpaid 27 days after its due date. In this case the report will show the invoice in the 1-30 days classification column. Alternatively, suppose the invoice is unpaid 55 days after its due date. In this case the report shows the invoice in the 31-60 days column.
On the report, a sub-total is drawn showing the aged payables for each supplier. Additionally a total line shows the aged payables for the business as a whole. Finally, a line is added to show what percentage of the total outstanding accounts payable is represented by each age classification. For instance, in the example aged accounts payable report above, the amount outstanding between 1 – 30 days is 2,800. Consequently as a percentage and this represents 2,800/15,700 or 17.8% of the total aged accounts payable.
A business normally produces an aged accounts payable report at the end of each accounting period.
As can be seen the aged payables report above shows overdue vendor invoices. This may indicate that the business places too much reliance on supplier credit to fund its business or alternatively that cash is not properly controlled.
Conclusion
In conclusion, the aged payables report is an important document for a business to have in its financial records. The aged payables report is an essential tool for accounts payable management. It helps a business keep track of its obligations and ensures that they are paying their invoices on time thereby avoiding late payment penalties. Furthermore by examining the report regularly, the business can identify any trends in its payment practices and make changes as needed to improve its cash flow.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.