The accounts payable aging report categorizes payables to suppliers based on time buckets. The report is typically set up with 30-day time buckets, so that each successive column in the report lists supplier invoices that are:
- 0 to 30 days old
- 31 to 60 days old
- 61 to 90 days old
- Older than 90 days
The intent of the report is to give the user a visual aid in determining which invoices are overdue for payment. However, a key flaw in this report is that it assumes all invoices are due for payment in 30 days. In reality, some invoices may be due on receipt, in 60 days, or almost anywhere in between. Consequently, an invoice listed on the aging report as current might actually be overdue for payment, while an invoice listed in the 31 to 60 days time bucket may not yet actually be payable.
For the report to be effective, it should be periodically cleaned up, so that stray debits and credits are removed from the report. Otherwise, it tends to become cluttered over time and therefore more difficult to read.
Given the issues noted here, a better solution is to use a report generated by the accounting system, which lists only those supplier invoices that are nearly due or overdue for payment, based on invoice dates and supplier payment terms.
The aging report is sometimes used by a company's outside auditors as a listing of payables due as of the audit date. However, this report is only useful to them if its total matches the ending accounts payable balance in the general ledger.