Aged debt means debt that is overdued by at least one ( or more) period of time, e.g. 30 days. Analysis of aged debt is one the most prestigous tool of management in respect of showing at a glance the status of debts within the total (B. Edwards 2004, p. 31).
Aged Debt Analysis
There are two types of Aged Debt Analysis (B. Edwards 2004 p.200):
- "detailed aged debt analysis sequenced as invoice within customer within ledger section with each invoice in its edge slot, or in any format specified by the user
- summer aged debt analysis ('the prime tool'), with one line per customer, representating total aged debt for each account, by region, by salesperson, by product or again in any format specified by the user."
Aged Debt Analysis is often related to the Aged Debt Report or Agded Receivables Analysis. It is main source of information using for collection activity. This analysis can also show a single line balance for one, particular account aged in months or days. Aged Debt Analysis is main tool used by the collector; from the input which was created during a course of an accounting period ( usually a month) a statement of account showing the individual balance on every account is produced ( G. Bullivant 2012, p. 229). According to G. Bullivant many companies can choose from a many formats but the basisc needs are always the same (2012, p. 229):
- Quantity of outstandingness ?
- How is the outstanding balance made up?
- Quantity of the overdued outsatnding balance?
- By how long is overdue?
- Payment terms on the account
- What time and how should an aged analysis of the ledger be produced?
Thanks to the Aged Debt Analysis a rolling 1 or even 12-month history can be not only on sreen display but also a hard copy. It is in effect merely a month by month repeat of the Agded Debt Analysis in the addition of the DSO (wchich means days sales outsatnding average credit taken) figures (B. Edwards 2004, p. 171). Aged Debt Analysis underlines the collectable balances in a handy way, but usually it is the statement of account which contains the make-up uf those balances (B. Edwards 2004, p. 171). It should cointain: name of cutomer and his credit data, period of time, total current and overdue debt (B. Edward 2004, p. 170).
Aged Trial Balance Analysis
Formats of aged debt reports vary enormously but they should have all 16 items required (credit risk category, DSO for account etc.) included. The reports are grouped depend on business for example by sales office, geographical area, ledger's type and so on with a final grand total (G. Bullivant 2012, p. 368).
- BPP Learning Media (2009) CTH - Finance for Tourism and Hospitality BPP Learning Media, London
- Bullivant G. (2012) Credit Management Gower Publishing, Farnham
- Edwards B. (2004) Credit Management Handbook Gower Publishing, Burlington
- Rasul S. (2010) Secrets of a Serial Entrepreneur: A Business Dragon's Guide to Success Capstone Publishing, Chichester, West Sussex
- Sunderland R. (2012) Financial Mail on Sunday Guide To Running Your Own Business Random House, New York
Author: Dominika Kuraś