Getting paid in full and on time is crucial for any business's cash flow, so latepayments and bad debts are a constant threat. Accounts receivable reports are the key toolsthat enable businesses to manage their accounts receivable (AR) balances, maintain goodcustomer relationships and forecast cash inflows. By alerting businesses to overduepayments, AR reports help companies avoid bad debts.
In recent years, the nature of AR reports has been evolving in many small and midsizedbusinesses as the pace at which those organizations operate accelerates. Instead of theperiodically printed documents called to mind by the term “reports,” AR reportsare morphinginto real-time queries of accounts receivable data, the results of which give businessmanagers up-to-the-minute data, so that their payments and collections interactions withcustomers are fueled by the most accurate information possible.
Key Takeaways
- Accounts receivable is the money owed to the business by its customers from purchasesthey don't pay for upfront — i.e., credit sales.
- Paying close attention to accounts receivable helps businesses manage cash flowefficiently and minimize bad debts.
- There are three primary categories of accounts receivable reports: receivables bycustomer, aging reports and payments history.
- Receivables by customer reports help businesses manage customer relationships and focusattention on critical segments, such as the largest, riskiest or newest customers.
- Aging reports are important for determining the right collections efforts to pursue witha given customer and are helpful in cash flow management.
- Customer payment history reports are important for credit control and cashreconciliations.
What Kind of Reports Are Important for Accounts Receivable (AR)?
“Accountsreceivable” is the money owed to your business by its customers from creditsales,and AR is recorded under “current assets” on a company's balance sheet becauseit's typically due for payment within a year. Managing AR is part of thebusiness's accounting processes, andif sales are strong, the accounts receivable asset on the balance sheet can grow. But alarge accounts receivable asset coupled with a low cash balance can be a warning sign thatthe business is not managing its invoicing and collection efforts efficiently. So, it'simportant to have reports that dig down below the surface of that accounts receivable assetto inform AR managers, who can then take appropriate action. There are three principalkinds: customer receivable reports, aging reports and payment history reports.
Customer receivables reports.
Break down the accounts receivable balance by customer. When customer receivablesreports take the form of a real-time display rather than printed paper, businessescan see how receivables change as customer payments arrive and are matched againstinvoices. Customer receivables reports include open receivables awaiting payment,closed receivables that have been paid and other reports, such as items that havenot yet been invoiced (unbilled orders).
Aging reports.
Break down unpaid invoices by time — i.e., if, and for how long, they areoverdue. They show the extent and length of overdue payments, which businesses canuse to take appropriate collection action as well as estimate bad debt. When abusiness issues an invoice, it typically states the payment terms. Thirty days isthe traditional standard, but shorter and longer time periods are also common. Asummary aging report categorizes unpaid invoices into intervals based on the paymentstatus. Typical intervals are current (that is, it's not overdue), 1-30 daysoverdue, 31-60 days, 61-90 days and over 90 days. Summary aging reports typicallyconvey the total invoiced amount outstanding in each time period, while detailedaging reports list the actual invoices outstanding in each period. Aging reports canalso be organized by other variables besides the customer account, such assalesperson, region, invoice number and collections agent.
Payment history reports.
Show individual customers' payment history. This is important for managingregular customers, especially if they have credit lines. Payment history reportscome in two forms: payment history by payment made and payment history by invoice.
How Are Accounts Receivable Reports Used?
AR reports provide visibility into the status of customer payments against current invoices.They’re used for managing customer relationships and cash flow, as well as evaluatingtheefficiency of a business’s invoicing and credit control processes.
When it comes to customer relationships, business managers need to know how much eachcustomer owes and when monies fall due. It's useful for online or digital customerreceivables reports to include alerts for payments that become overdue, so that AR managerscan follow up with the customers quickly. Customer receivables reports also show whichcustomers owe the most. This can help business managers improve cash flow byfocusing on obtaining faster payment from larger debtors. Customer receivable reports areoften analyzed based on some filter, such as region, salesperson or amount of revenue.
Aging reports can be useful for forecasting cashflow. They support business managers in directing collections efforts to minimizebad debts, and help in estimating future cash inflows. In addition to traditional paperreports, digital displays of real-time information can keep business managers fully informedon expected incoming cash. Business managers can also use aging reports to identifycustomers that are taking a long time to pay and to take timely action to prevent overdueamounts from becoming unrecoverable debts. Different tactics may be used based on the extentof delinquency. A large number of overdue amounts may also signal that the business needs totighten credit policies for new and existing customers.
Payment history reports help business managers understand the quality of their customerrelationships and the effectiveness of their invoicing and credit controls. Payment reportstrack partial payments as well as full payments and highlight credits and adjustments.Payment activity helps a business evaluate the value of its customer relationships. Whileevery business likes to have regular customers, those that are persistently late withpayments or have a history of bad debts can be more trouble than they're worth. Paymentreports also give insight into invoicing problems,such as errors and rework. In addition, high levels of invoice adjustments may point towardproblems in the company's invoicing processes, product fulfillment or misaligned salespromises. And if too many customers are taking a long time to pay, that's bad for thebusiness's cash flow.
When the data that goes into such AR reports is available via accounting software in realtime, it can help a business more efficiently manage credit and collections operations. Forexample, a business manager might query the software to provide a list of all customerinvoices that are 30 days or more past due and/or sort the list from most to least amountowed. The resulting information can help direct collections efforts where they're mostproductive.
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6 Crucial Accounts Receivable (AR) Reports
Any individual business may have many different ways of analyzing its accounts receivablesoperations — and as many different AR reports to support them. But the following sixtypes of AR reports are the most commonly used by small and midsized businesses.
Accounts Receivable Register:
The AR register report is a list of all the billing activity for a period. Mostimportantly, the entries in the report represent amounts owed by customers for thepurchase of inventory, goods or services, and include summary data from theunderlying invoices, such as invoice number, customer name, date and sale amount.However, the AR register also includes billing adjustments, credit memos andcustomer payments. The AR register can be sorted in many ways, such as by closed ARor open AR awaiting payment. The AR register is sometimes referred to as asubledger, because it presents all the detailed information behind the totals thatare posted into a company's AR account in its general ledger.
Receivables by Customer:
This AR report can be similar to an outstanding sales report or sales outstandingreport in that it displays outstanding balances by customer for invoicedreceivables. The receivables by customer report is typically presented by customername or customer number. For completeness, it can also include unbilled invoices ifthe goods/services have been delivered, though these may have to be added manuallyas journal entries. Outstanding balances reduce automatically as incoming paymentsare matched to receivables. Businesses can use this report as part of their creditmanagement and receivables collection processes.
Aging Summary:
The AR aging summary report summarizes unpaid invoices and statement charges, groupedby the length of time the invoice is past due. For each customer that owes money,the report shows what the customer owes for the current billing period and what, ifanything, they haven't paid from previous billing periods. Accounts receivablesoftware typically sets aging intervals in standard 30-day periods, such as 1-30days, 31-60 days and 61-90 days. Older invoices tend to be shown in a generalcategory marked “over 90 days.” The report shows unpaid invoices in thebillingperiod in which they fell due, so, for example, in a report dated July 31, 2022, anunpaid invoice that was due for payment on April 30, 2022 — in other words, 91days late — would be shown in the “over 90 days” column.
Aging Detail:
The AR aging detail report works the same way as the aging summary but showsindividual unpaid invoices and statement charges rather than subtotals by customer.The invoices are grouped and summed by customer and then the total for the period issummed. An aging detail report typically shows the following information for eachcustomer transaction:
- Customer — The legal name of the customer.
- Transaction type — The type of customer transaction, such as invoice,statement charge or customer credit.
- Date — The date on which the transaction was entered into the system.
- No. — The number of the transaction, specific to the transaction type.
- P.O. No. — The purchase order number for the transaction.
- Due Date — The date on which payment was due.
- Age — The number of days past due.
- Amount Due — The amount due.
Payments History by Invoice:
This AR report provides a view of each customer's payment history organized byinvoice, showing how those invoices were settled. This information can be helpfulwhen reconciling customer accounts.
Payments History by Payment:
This AR report provides a view of each customer's payment history organized bypayment, including how those payments were applied to invoices. This report includesall methods of payment and is helpful when reconciling or tracing a customer'spayment method through the billing process.
Grow Business With AR Reports and Accounting Software
In the past, producing accounts receivable reports was a time-consuming manual process thatinvolved reconciling customer payments and invoices and keeping a register of overduepayments. But that no longer needs to be the case. NetSuite's automatedaccounting software performs such reconciliations in real time, matching customerpayments to invoices as they arrive and providing business managers with instant insightinto receivables movements. Its accounts receivable dashboard enables managers to see keyindicators at a glance and drill down into detail with a range of bespoke, configurablereceivables and aging and history reports, all updated in real time.
Cash flow is king for any business, and good customer relationships are essential. Accountsreceivable reports help businesses manage cash collections efficiently, maintain goodcustomer relationships and minimize bad debts. That helps organizations deliver sustainablegrowth and strong returns over the long run.
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Accounts Receivable Reports FAQs
What is accounts receivable and its main types?
Accounts receivable is all the monies owed to a company by customers and other parties. Themain types of receivables are trade accounts receivable, notes receivable and“other”receivables. Trade AR represents amounts due from customer sales made on credit in theordinary course of business. Notes receivable are amounts owed to a company that are tied toan underlying promissory note, which details in writing the payment terms for a purchasebetween the business and the “maker” of the note, usually a customer oremployee, andsometimes called a debtor. Other receivables are ancillary amounts due to the company fromthird parties, such as income tax refunds or interest on investments not yet paid out.
What kind of reports are important for accounts receivable?
Three kinds of reports are important for accounts receivable: receivables reports, which listinvoices issued and payments due for each customer; aging reports, which show the length oftime invoices have been outstanding, which invoices are overdue and by how long they areoverdue; and customer payment history reports, organized by invoice and payments made.
How do you prepare an accounts receivable report?
AR reports begin with information from the sales ledger, including details of purchase ordersand invoices. Bank statements provide information on payments received or, in the case ofautomated solutions, a payment record shows the amounts received via various payment methodsand automatically matches them to outstanding invoices.
Where is accounts receivable reported in financial statements?
Accounts receivable is reported under Current Assets on the balance sheet.
