Debtor ageing analysis, also known as accounts receivable ageing analysis, is a financial tool used by businesses to assess the payment status of their outstanding customer invoices. It categorizes the accounts receivable balance into different age groups based on the number of days the invoices have been outstanding. This analysis helps businesses monitor and manage their cash flow, identify potential credit risks, and take appropriate actions to collect overdue payments.

Here’s how debtor ageing analysis is typically performed:

1. Determine ageing periods: Define the time intervals or ageing periods for categorizing the outstanding invoices. Commonly used intervals are 30 days, 60 days, 90 days, and beyond.
2. Gather accounts receivable data: Collect data on all outstanding customer invoices, including the invoice number, invoice date, due date, customer name, invoice amount, and payment status.
3. Calculate ageing: Calculate the number of days each invoice is past its due date. This can be done by subtracting the due date from the current date.
4. Categorize invoices: Group the invoices into different age brackets based on their overdue duration. For example, invoices that are 0-30 days overdue would fall into the “Current” category, 31-60 days overdue in the “30-60 days” category, and so on.
5. Calculate totals: Sum up the outstanding invoice amounts for each age category to determine the total outstanding balance in each bracket.
6. Analyze the results: Review the ageing analysis report to gain insights into the payment patterns of customers. Identify the proportion of outstanding invoices in each age group and assess the overall health of the accounts receivable. Pay attention to any significant balances in the older age brackets as they may indicate potential collection issues or credit risks.
7. Take appropriate actions: Based on the analysis, develop a plan to manage overdue payments. This may involve sending payment reminders, contacting customers for follow-up, initiating collection efforts, or renegotiating payment terms. For severely overdue invoices, businesses may consider more aggressive actions, such as involving collection agencies or legal proceedings.
8. Regularly update and monitor: Perform debtor ageing analysis on a regular basis, such as monthly or quarterly, to track changes in the accounts receivable balance and address any emerging issues promptly. Comparing ageing reports over time can help identify trends, improvements, or areas requiring further attention.

Debtor ageing analysis provides businesses with a clear picture of their outstanding receivables and enables them to take proactive measures to improve cash flow, minimize bad debts, and maintain healthy customer relationships.