Accounts payable ageing

Accounts payable ageing analysis is a useful analysis based on the accounts payable ageing report. But what is an accounts payable ageing report? It is a party-wise list of payable balances grouped in relevant age brackets providing useful information about the age of payables. The age of payable refers to the time for which an accounts payable balance is outstanding. For accounts payable, when the credit purchase is recorded, second effect is the recognition of trade payable balance. So, the age of a trade payable is the time that a payable is outstanding from the time of its initial recognition.

Accounts payable ageing report can be customized by companies according to their vendor types and their analysis requirements. Age brackets can be based on number of days, number of weeks, number of months, or number of years etc. depending on the relevant average credit periods of the payables.

Sample accounts payable ageing report is shown below for better understanding.

Uses of accounts payable ageing

The accounts payable ageing report provides useful information for accounts payable management. Some of the uses are highlighted below:

  • Payables ageing helps in identification of long outstanding payables.
  • A company can set some checkpoints in the ageing report so that it does not miss a due date resulting in late payment fines and damage to its reputation.
  • Payables ageing can be used to prioritize and schedule payments in accordance with their respective due dates.