Do you wonder what “aging reports” are? Often used by management for cash control, these reports are available in many popular programs, such as QuickBooks and Peachtree.
Aging reports are not old, “aged” reports; rather, they provide detailed financial information on accounts payable and receivable, including pledges receivable. For instance, suppose your organization owes $1,000 and you want to know more about this amount, such as who you owe, how much and for how long. You can get this information on an “Accounts Payable (A/P) Aging Report.”
If you’re interested in what others owe your organization, an aging report on accounts receivable is for you. For example, you see $10,000 in pledges receivable and wonder who owes you, how much and for how long. These are all available on “Accounts Receivable (A/R) or Pledges Aging Report.”
All aging reports follow the same format with date intervals on the top and names, dates and amounts to the left. The idea is to give users a quick way to see the timing of debt due or amounts to be received.
** Aging reports don’t show paid items, only unpaid ones **
Below is an example of an aging report regarding accounts payable—amounts owed to others.
In this case, the organization owes $300 for up to 60 days. So, depending on the situation, this bill may be paid first since it’s the oldest bill due. Since most organizations value good reputations about paying their bills on time, this report is a great tool to prioritize payments and avoid problems.
An aging report for receivables will look like this example, but the information would be regarding money owed. Oftentimes, fundraising people use this report to follow up on late pledge payments.
Pay attention to the dates of such reports. Since bills are being paid and donations are received regularly, the numbers change often. If you see no changes, you must verify with the accounting department what is going on. Maybe there is a cash shortage or maybe the accounting software is not being updated, as it should. Reports are only useful when data is entered regularly with no delays.
Check out the book “Nonprofit Finance: A Practical Guide” –– Nominated for the 2016 McAdam Book Award