Definition of 'Aging Schedule'
An accounting table that shows the relationship between a company’s bills and invoices and its due dates. Often created by accounting software, aging schedules can be produced for both accounts payable and accounts receivable to help a company see whether it is current on its payments to others and whether its customers are paying it on time.
Investopedia explains 'Aging Schedule'
An aging schedule often categorizes accounts as current (under 30 days), 1-30 days past due, 30-60 days past due, 60-90 days past due, and more than 90 days past due. Companies can use aging schedules to see which bills it is overdue on paying and which customers it needs to send payment reminders to or, if they are too far behind, send to collections. A company wants as many of its accounts to be as current as possible. A company may be in trouble if it has a significant number of past-due accounts.
Aging schedules can help companies predict their cash flow by classifying pending liabilities by due date from earliest to latest and by classifying anticipated income by the number of days since invoices were sent out. Besides their internal uses, aging schedules may also be used by creditors in evaluating whether to lend a company money. In addition, auditors may use aging schedules in evaluating the value of a firm’s receivables.
If the same customers repeatedly show up as past due in an accounts receivable aging schedule, the company may need to re-evaluate whether to continue doing business with them. An accounts receivable aging schedule can also be used to estimate the dollar amount or percentage of receivables that are probably uncollectible.