How to Cross Age Accounts Receivable

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Accounts receivable is the total amount of money owed to the business by other businesses or individuals usually referred to as debtors. Summarized in the aged accounts receivable listing, these debtors’ outstanding receivables split the outstanding debts into 30, 60 and 90 days periods. The process of cross-aging accounts receivable involves identifying and classifying debtors whose outstanding debts that exceed 90 days constitute more that 50 percent of their total outstanding debts. It is always important to cross-age accounts receivable of your business so that you can facilitate the process of taking remedial actions against unreliable debtors who owe both current and long overdue debts to the business..

Open up a spreadsheet program and create columns entitled “Vendor Name,” "30-Day,” 60-Day,” "90-Day” and "Total." Include a column for comments or notes and this will effectively be your aged accounts receivable listing. Input the data into each of the columns appropriately. Proceed to add the totals of the amount of money owed by each debtor in the "Total" column.

Proceed to the 90-days column and summarize the outstanding debts appearing in this column and add the total of each debtor’s outstanding amount of money.

Divide each debtor’s total outstanding debt in the 90 days column by the total debts owed by each of the debtors and multiply the result by 100 to determine the percentage of each debtor’s 90 days outstanding debts to the total debt owed by each of the debtors to the business.

List the debtors whose 90-days outstanding debts are 50 percent and above. Compute the total amount of the outstanding debts owed to the business by these particular debtors and in so doing, you will have cross-aged your accounts receivable.

Tips & Warnings

  • Establish strict credit policy that stipulates the penalties for debtors who default on timely payments of their outstanding debts to avoid cross-aging large amounts of debts. Establish clear debt collection guidelines and credit policy that will facilitate timely collection of checks for outstanding debts once they become due to avoid cross-aging large amounts of debts. Simplify the process of cross-aging accounts by using Microsoft Excel worksheet functionality to create a customized aged accounts receivable listing that automatically updates each debtor's outstanding debts from 30 days through to 90 days.
  • Do not forget to update your aged accounts receivable listing every month because such tendencies come with the risk of losing track of the aging debts.

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