Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A single average-days-to-collect figure can hide a genuinely dangerous concentration of old, possibly uncollectible balances behind a comfortable-looking blended number. A portfolio that's mostly current with one large 120-day account can average out looking reasonable while that one account is heading toward a write-off: the aging buckets reveal that; the single average buries it.
Before you rely on it
What to check
Look at the over-60-day share specifically, not just the weighted average. A rising share there predicts collection problems well before the average moves.
The common error
Where people go wrong with accounts receivable aging calculator
Reading a stable average age as evidence collections are healthy. New current business can mask a growing pile of old, stuck balances by diluting the blended number even as the actual bad debt keeps growing underneath it.
Sensitivity evidence
How current receivables changes the weighted average receivable age
| Current receivables | Weighted average receivable age | Receivables over 60 days | Over-60-day share |
|---|---|---|---|
| $120,000 | 35.7 days | $40,000 | 19.0% |
| $135,000 | 34.3 days | $40,000 | 17.8% |
| $150,000worked example | 33.1 days | $40,000 | 16.7% |
| $165,000 | 32.1 days | $40,000 | 15.7% |
| $180,000 | 31.1 days | $40,000 | 14.8% |
Every input, tested
Which input moves the weighted average receivable age most
| Input | Tested from | To | Weighted average receivable age at each end | Swing |
|---|---|---|---|---|
| Current receivables | $135,000 | $165,000 | 34.3 days to 32.1 days | 2.3 days (6.9%) |
| Over-90-day receivables | $13,500 | $16,500 | 32.7 days to 33.6 days | 0.9 days (2.7%) |
| 61–90 day receivables | $22,500 | $27,500 | 32.7 days to 33.6 days | 0.9 days (2.6%) |
| 31–60 day receivables | $45,000 | $55,000 | 32.9 days to 33.4 days | 0.5 days (1.5%) |
Two variables at once
Weighted average receivable age by current receivables and 31–60 day receivables
| Current receivables \ 31–60 day receivables | $40,000 | $50,000 | $60,000 |
|---|---|---|---|
| $120,000 | 35.3 days | 35.7 days | 36.1 days |
| $135,000 | 33.8 days | 34.3 days | 34.8 days |
| $150,000 | 32.6 days | 33.1 days | 33.6 days |
| $165,000 | 31.5 days | 32.1 days | 32.5 days |
| $180,000 | 30.6 days | 31.1 days | 31.6 days |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Current receivables | $150,000 |
| 31–60 day receivables | $50,000 |
| 61–90 day receivables | $25,000 |
| Over-90-day receivables | $15,000 |
| Weighted average receivable age | 33.1 days |
| Receivables over 60 days | $40,000 |
| Over-60-day share | 16.7% |
Where the inputs come from
Take the receivable balances from your aging report in the accounting system, grouped by how long each invoice has been outstanding: current, 31 to 60 days, 61 to 90 days and over 90. The buckets should add up to total receivables and match the balance sheet. Use the report as of month end. If you use different buckets, such as 1 to 30 days past due, remap them to the closest of these four before entering them.
Using the weighted average receivable age in a real decision
Set aside a reserve for doubtful accounts.
When the result stops applying
The weighted age uses bucket midpoints as an approximation, and the over-90 bucket is open-ended, so it may understate real age. A few large invoices can dominate. Disputed invoices, partial payments and credits distort the report. The figure does not reflect whether customers are paying late because of poor service or because of cash problems.
What to compare it with
Compare the overall collection speed with the days sales outstanding calculator, and consider how late payments affect the cash conversion cycle. The invoice late fee page shows what you can charge. A written credit policy and a habit of following up at 15 days past due move balances down the buckets.
People also ask
Frequently asked questions
How much of my receivables should be over 60 days?
Ideally a small share, under 10% for many businesses. A rising share of old invoices is an early sign of collection problems or customer trouble.
What is an allowance for doubtful accounts?
A reserve, based on the aging and past losses, for invoices you do not expect to collect. It reduces reported receivables and profit before the loss actually occurs.
When should I send an invoice to collections?
Many businesses escalate after 60 to 90 days, but the right time depends on the amount, the relationship and the cost of collection. Written notices come first.