Schedule of accounts receivable definition
/What is the Schedule of Accounts Receivable?
A schedule of accounts receivable is a detailed report showing the amounts customers owe an organization as of a specific date. It typically lists outstanding invoices by customer, including invoice dates, amounts due, payments or credits applied, and remaining balances. The schedule helps the accounting department reconcile receivable balances to the general ledger, identify overdue invoices, prioritize collection activities, investigate discrepancies, evaluate customer payment patterns, and support estimates of potentially uncollectible accounts.
How to Use a Schedule of Accounts Receivable
There are several uses for the receivables schedule, which are noted below. It is primarily used for ongoing collection activities, but can also be useful for determining customer credit levels and calculating the likely amount of bad debt in the outstanding amount of receivables. It is also used as the basis for some audit testing by a firm’s outside auditors.
Collections. The collections team examines the schedule to determine which invoices are overdue, and then makes collection calls to customers. This use is declining among larger organizations, which instead use collections software which automatically identifies overdue invoices and presents the collection staff with summaries of the prior contacts with customers regarding the outstanding amounts.
Credit. The credit department reviews the report to see if any customers are so late in paying that their credit levels should be reduced.
Bad debt calculation. The information in the report is used to develop a bad debt percentage, which is used to update the balance in the allowance for doubtful accounts. This analysis is conducted as part of the closing process at the end of each reporting period.
Audit examination. Outside auditors make selections from the report as part of their year-end testing procedures, to see if the year-end accounts receivable balance is accurate.
Format of the Schedule of Accounts Receivable
The schedule of accounts receivable usually clusters invoices into 30-day time buckets. Those invoices in the 0-30 day bucket are considered to be current. Additional time buckets cover the 31-60, 61-90, and 90+ day periods. Invoices located in the older time buckets are targeted for more aggressive collection activities. Those in the oldest time bucket may be written off.
The schedule is a standard report in most accounting software packages, and comes with pre-configured time buckets. It is sometimes possible to alter the report settings to use different durations for the time buckets. A sample of the report appears below.
