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What Is an Accounts Payable Aging Report? Definition & Benefits

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hi this is Tim yod with fit small business I've been a CPA for 25 years and today I'm going to talk to you about accounts payable aging reports and how to use these reports when cash flow is a little slow in your business so an accounts payable aging report shows all of your unpaid vendor invoices and it's going to group them by the number of days that they're overdue so an important best practice in accounts payable management is to always enter your bills as soon as you receive them a lot of companies are going to wait and they don't enter the bill until I actually issue a check to pay it well if you do that you're not really utilizing your accounting software to the full extent you should enter those expenses immediately so that you can then allow the program to help you manage the accounts payable manage the bills that are due help you select which ones need to be paid and which ones can perhaps wait until next month so I suggest looking at your accounts payable aging report at least once a month or whenever you sit down to pay bills so if you pay bills every week generate the account's payable aging report before you pay bills if you do it once a month generate that report once a month now really this report is valuable when you just don't have the cash flow to pay all of your vendors um it's unfortunate I know we'd love to all pay all of our bills on time but sometimes you know we fall a little behind and we're not going to be able to pay everything that month that's when you need to generate An accounts payable aging report so you can decide which vendors are going to get paid this month which vendors are going to have to wait until next month so if you're using QuickBooks Online they have a very handy uh accounts payable aging report the sample I showed you uh was from QuickBooks very easy to to print uh in your left menu bar click on reports and then there's a search bar above simply select accounts payable and the accounts payable aging detail or aging summary will come up and we'll talk about each of those first let's look at the AP aging summary uh so this summarizes all outstanding invoices to each of our vendors so here's Cecil's lockworks we can see we have some invoices that are current and we have other invoices that are between 1 and 30 days late 31 and 60 days late and 61 and 90 days late so personally this is my favorite uh report this is going to show how much you owe uh to each vendor in a very easy to understand format the other repor of available is your AP aging detail now this one is listed by uh bill or invoice rather than by the vendor so here we have our top uh group are 91 days and older and that's this particular bill from Electronics manufacturer here we see ciso lockworks has looks like five six seven different bills that are late and this shows each of the bill uh detail so up to you whatever you like to work with I prefer to see how much do I owe each vendor individually to determine whether I need to uh pay money to that vendor this month again we'd love to pay all of our vendors every month but sometimes it's not possible and that's when this analysis can help us so when I sit down um unfortunately I've had uh the uh opportunity to do this type of things with clients uh when we sit down to pay bills first thing we do is we have to determine how much cash do we have available to pay bills um when you do that make sure you set aside enough cash to cover your upcoming payroll and your upcoming payroll taxes um in almost all situations those need to take precedent overpaying your vendors um you can't stay in Business Without uh employees so you need to make payroll and you absolutely need to pay payroll taxes if you collect money from your employees you need to turn that over to the government the penalties can be outrageous and to be honest in my when a company falls behind making their payroll tax payments they go out of business it's the beginning of the end um you just cannot miss payroll tax deadlines so set enough money aside uh for those things prior to paying any vendors then you can see this is how much cash I have left over now I need to decide how am I going to divide that among the vendors that I owe well first thing I would do start with that 90 days 91 days and over column so obviously these are the ones that are the um most overdue these are the ones that are likely going to stop providing service or products to you um but it doesn't necessarily mean you pay everybody that's in the 91 or over column you think about can I live without that product or service and that is really the main thing you want to think about when you look at this accounts payable aging report and probably why I like to look at it uh summarized by vendor is unfortunately we need to admit to oursel that all not all vendors are of equal importance so you know if we're a roofing company whoever provides our roofing material is probably one of our most important vendors we can't let we can't get so far behind with them that they stop shipping us roofing material right we'll be in big trouble what are we going to sell to our customers how are we going to complete jobs so look through your vendor list determine which ones are the most important which ones are threatening to shut you off um which ones are not uh other vendors you know magazine subscriptions professional organizations all of those things are probably far less important so even if they are 91 days overdue you proably you may not want to pay them if you have more important vendors uh that are even uh overdue for a shorter amount of time um so uh this is really about weighing the importance of vendors How likely are they to shut you off and to keep the important vendors providing services and products until you get back on your feet so this was Tim Yoder with fit small business I hope this discussion was was helpful I hope you never have to rely on an accounts uh payable aging report um to decide which vendors to pay uh but if you do I hope this was very helpful until next time Tim yod with fit small business

This transcript was generated automatically from the video's captions and may contain errors.

Written By

Danielle Bauter

Reviewed By:

Eric Gerard Ruiz, CPA

Published: Nov 13, 2024

Updated: Feb 14, 2025

5 minute read

An accounts payable (A/P) aging report provides a concise overview of all outstanding vendor invoices categorized by the due date, enabling businesses to track their payment obligations efficiently. This report is essential for maintaining financial stability and fostering positive vendor relationships.

A primary benefit of utilizing an A/P aging report is proactive cash flow management. By clearly outlining upcoming payments, businesses can accurately forecast and allocate funds, which prevents missed payments and potential late fees. For small businesses, the A/P aging report is a particularly valuable tool, offering a streamlined approach to managing payables and ensuring financial health.

Why Is an A/P Aging Report Important?
When & How to Generate an A/P Aging Report
How to Read an A/P Aging Report
How to Use the A/P Aging Report to Manage Vendor Payments
Frequently Asked Questions (FAQs)
Bottom Line

Why Is an A/P Aging Report Important?

An A/P aging report acts as a financial snapshot of your company’s outstanding obligations to vendors. It helps you with:

Managing cash flow: The report provides a clear picture of upcoming payment obligations, allowing you to anticipate cash needs and plan accordingly. This helps avoid cash flow shortages and ensures you have funds to cover expenses. Also, by categorizing invoices by due date (e.g., 30, 60, 90 days overdue), you can prioritize payments and address the most pressing ones first.
Maintaining healthy vendor relationships: Staying on top of due dates helps maintain good relationships with suppliers. Consistent on-time payments can lead to more favorable terms, early payment discounts, and continued access to goods and services. The report can also highlight potential problems with specific vendors. For example, consistently late payments to a certain vendor might indicate a dispute or an issue with their invoicing process.
Monitoring financial health: The report is a key component of financial statements and provides insights into your company’s overall financial health. It helps you understand your short-term liabilities and make informed decisions about budgeting and investments. Additionally, analyzing the report over time can reveal trends in payment behavior, which help identify areas for improvement in your A/P process, such as negotiating better terms or streamlining invoice processing.
Tracking operational efficiency: Reviewing the report can help identify errors in invoices, such as duplicate entries or incorrect amounts, before payments are made. By analyzing the report, you can identify bottlenecks or inefficiencies in your A/P process and take steps to improve it. This can lead to cost savings and reduced workload for your accounting team.

When & How to Generate an A/P Aging Report

You should generate an A/P aging report at least once a month or whenever you’re paying your vendors. If you do things manually, you must gather data from your A/P subsidiary journals and reconstruct the data in a spreadsheet file.

By using accounting software, you can generate a detailed or summarized A/P aging report with one click. For instance, in QuickBooks Online, select Reports in the left-hand menu bar. For more information, see our guide on how to run an A/P aging report in QuickBooks.

How to Read an A/P Aging Report

The image below shows an A/P aging summary report that presents the total balance per vendor, segregated by age group. It tells you how much you owe each vendor but doesn’t show the exact invoices that need to be paid.

If you want to see the overall status of your liabilities, a summarized A/P aging report, like the one above, gives you a snapshot of your payables. The best use of the summarized report is for cash flow planning purposes, especially when cash flow is poor, and you need to decide which vendors to pay with a limited amount of cash.

Detailed A/P Aging Report from QuickBooks Online

The detailed A/P aging report shows a list of invoices per customer and per age group. In the sample report above, the oldest bill that remains unpaid as of the report date is a bill from Patton Hardware Supplies for $13,695, with an open balance of $5,000. By reviewing our A/P aging detail, we know that we should make the $5,000 payment a high priority since this debt might be referred to collections.

Our related resources:

How to Use the A/P Aging Report to Manage Vendor Payments

In a perfect world where we always have the cash we need, we wouldn’t need an A/P aging report—we would simply pay all of our bills on time. Unfortunately, in the real world, we sometimes must choose which vendors get paid and which can wait.

The A/P aging report can be extremely useful in allocating limited cash to vendors by following a few recommendations:

Determine the maximum amount of cash you have available to pay vendors. Be sure to set aside enough cash for upcoming payroll and payroll taxes, which I recommend paying before vendors. Then, decide how to divide your available cash among your outstanding bills.
Give the “90 days and over” column the most attention as these debts are getting really old, so those vendors may stop selling to you, or you may be accumulating late payment fees. The potential of strained vendor relationships could also become an issue.
Acknowledge the hard truth that not all vendors are equally important to you. While you eventually hope to pay all your debts, are there any vendors you can’t live without? For instance, if you get the majority of your materials from a single vendor, they should be given priority.
Look for any unusual items, such as invoices much larger than usual or payments that appear to have been made but are still listed as outstanding. This can help uncover errors or discrepancies that need to be addressed. If you find discrepancies, contact the vendor immediately to resolve the issue. This might involve requesting a corrected invoice or providing proof of payment.
Consider negotiating payment terms. If your aging report shows a consistent history of on-time payments, use this as leverage to negotiate with vendors. This could include extending payment deadlines or securing early payment discounts.

Frequently Asked Questions (FAQs)

What is an accounts payable aging report?

An A/P aging report is a snapshot of all outstanding vendor invoices your company owes, organized by due date. It categorizes invoices into time buckets (e.g., 0-30 days, 31-60 days, 61-90 days, and 90+ days overdue) to show how long invoices have been outstanding.What three transactions are reflected in the accounts payable aging report?

What three transactions are reflected in the accounts payable aging report?

The three main types of transactions reflected in an A/P aging report are vendor invoices, vendor credit memos, and invoice payments. The report takes all three transactions into account to provide an accurate overview of your company’s outstanding payables at any given time.

What information is included in an A/P aging report?

An A/P aging report includes the vendor name and contact details, invoice details (number, amount, date, and due date), aging categories, and total outstanding balance.

How often should I generate an A/P aging report?

It depends on your business needs, but I generally recommend generating it at least monthly. Some businesses may need to run it weekly or even daily, especially if they have a high volume of invoices or tight cash flow.

Can I customize an A/P aging report?

Yes, most accounting software lets you customize the report to fit your needs. You can choose which columns to display, filter by specific vendors or date ranges, and adjust the aging periods.

Bottom Line

The accounts payable aging report is a helpful tool that offers valuable insights into your company’s financial health and vendor relationships. By regularly generating and analyzing this report, you can proactively manage your cash flow, optimize payment processes, and foster stronger relationships with your suppliers. Taking the time to understand and utilize the information within the report can significantly improve efficiency, cost savings, and overall financial stability.

Danielle Bauter

Accounting Expert at Fit Small Business

Danielle Bauter has 25 years of experience as a Full-Charge Bookkeeper and has owned her own bookkeeping and payroll service for over two decades, working with various accounting software.