What is accounts receivable aging?

Accounts receivable aging categorizes outstanding client invoices by how long they've been unpaid, typically in buckets: current (0-30 days), 31-60 days, 61-90 days, and 90+ days. This analysis reveals collection patterns, identifies problem accounts, and predicts cash flow. For consulting firms, AR aging directly impacts working capital and helps prioritize collection efforts on accounts most at risk of becoming uncollectible.

Key characteristics

• Categorizes receivables into time buckets since the invoice date

• Standard buckets: current, 31-60, 61-90, 90+ days past due

• Healthy AR: 80%+ in current bucket, under 5% in 90+ days

• Reviewed weekly or bi-weekly to identify collection priorities

• Basis for insufficient debt reserves and collection strategy

• Tracked by the client to identify chronically slow payers

Why it matters for service firms

AR aging predicts cash flow problems before they become crises. Industry data shows that invoices 90+ days past due have only a 50-70% collection rate, compared with 95%+ for current invoices. A consulting firm with $200,000 in AR and 25% over 90 days faces potential write-offs of $25,000-$35,000. Early identification through weekly aging reviews enables intervention when the collection probability remains high. Firms that review AR aging weekly collect 15-20% faster than those reviewing monthly.

Real-world example

Harbor Consulting reviews AR aging and finds: $85,000 current, $42,000 at 31-60 days, $28,000 at 61-90 days, $35,000 at 90+ days—total AR: $190,000, with 18% over 90 days (a warning sign). Drilling into the 90+ bucket reveals one client owing $28,000. The founder immediately contacts the client, discovers a dispute over deliverables, and negotiates a $22,000 settlement paid within 10 days. Without the aging analysis, this account might have been written off entirely at year-end. The firm implements weekly aging reviews, and AR over 90 days drops to 4% within 6 months.