Accounting - Debtors (accounts receiveable) ageing analysis
Debtors (accounts receiveable) ageing analysis
Relates to budgeting in that it is a process designed to enable a business
to more accurately predict receipt of funds from individual debtors.
A typical ageing analysis may be shown as:
Age of debt
Comments may also be made as to the best strategy to recover these
It is important to know what the credit policy of the business is, before
commenting on the performance of the business in collecting of outstanding
debts. In this case if 30 days is given for payment then performance is
poor, as only 44% have been collected in that time. Should it be 60 days
then performance is much better with 80% collected (44% + 36%).
It is very important to watch the pattern emerging in the collection of
debts and be wary of any deterioration. Outstanding debts constitute
unproductive funds and it is in the interest of the business to collect
these debts as soon as possible.
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