What is invoice aging?

Invoice aging categorizes outstanding accounts receivable by how long invoices have been unpaid, typically in buckets of current (0-30 days), 31-60 days, 61-90 days, and 90+ days. Aging analysis reveals collection health and identifies problem accounts requiring attention. For professional service firms, invoices aging beyond 60 days become increasingly difficult to collect and may indicate client financial issues, disputed work, or administrative failures.

Key characteristics

• Standard buckets: Current, 31-60, 61-90, 90+ days

• Healthy portfolio: 80%+ current, minimal 60+ days

• Older invoices have a higher bad debt risk

• Triggers escalating collection actions by age bucket

• Should be reviewed weekly and acted upon promptly

• Key metric for cash flow management and risk assessment

Why it matters for professional service firms

Invoice aging predicts cash collection and bad debt. Research shows collection probability drops significantly after 60 days: 90%+ collection rate for current invoices, 75% at 60 days, 50% at 90 days, and declining further thereafter. Proactive aging management means intervening early when invoices move beyond their current status rather than waiting for problems to compound. Firms that actively manage aging (weekly review, automated reminders, escalating actions) maintain healthier AR portfolios and experience significantly lower bad debt.

Real-world example

Tom's IT consulting firm reviewed AR aging for the first time in months. Results: $420K total AR with distribution: Current $195K (46%), 31-60 days $110K (26%), 61-90 days $68K (16%), 90+ days $47K (11%). The 27% of AR over 60 days was alarming. Tom implemented automated payment reminders at 15, 30, and 45 days; personal calls at 45 days; escalation to the partner at 60 days; and the collections process at 90 days. He also identified two chronic slow-payers and had direct conversations about payment expectations. Six months later: Current improved to 71%; 31-60 to 19%; 61-90 to 7%; 90+ to 3%. Bad debt write-offs dropped 80%.