In the previous pages of this section we have mentioned Trade Receivables lists and Trade Payables lists:
- A Trade Receivables list is a list of the amounts owed to a business by its customers at a particular point in time and is constructed from the balances in the business’ Sales Ledger
- A Trade Payables list is a list of the amounts owed by a business to its suppliers at a particular point in time and is constructed from the balances in the business’ Purchases Ledger
Many accountants and bookkeepers will prepare and present these lists in such a way as to analyse the amounts owed according to the length of time they have been outstanding. When this is done we refer to them as Aged Trade Receivables lists (or Aged Debtors lists) and Aged Trade Payables lists (or Aged Creditors lists).
Illustration
A business’ Trade Receivables list is given below:
A bookkeeper could however, present the above list analysed according to the number of months the debts have been outstanding (note that a bookkeeper could split the periods of time in whatever way will be most useful to them).
Aged payables lists are presented in the same way.
Advantages of Aged lists
There are a number of advantages in analysing trade receivables or trade payables lists in this way.
- They make it easier to spot customers who need to be chased for payment
- They can highlight customers who should be charged interest for late payment
- They can highlight that there is a disputed debt
- They can make it easier to spot those customer balances that might have become irrecoverable
- They can help when a business decides whether to change the credit terms offered to customers
- They help a business identify those suppliers who need to be paid soon
- They can help a business plan their payments to suppliers over the coming month(s) thereby assisting with cash management
