How to Calculate AR Days in Account Receivable

by Alia Nikolakopulos; Updated September 26, 2017

Accounts receivable reports may help owners or management to make budget decisions, or provide financial information for outside parties, such as lenders or investors. Companies use aging reports to determine the amount of unpaid invoices they must collect on, and also the likelihood of collecting the account. If a company determines that an account will continue to go unpaid, an Accounts Receivable aging report may help determine accounts to send to an outside collection agency.

Step 1

Determine the period you allow customers to pay invoices without penalty or late fee. You may also refer to this time frame as a grace period. Many companies use a “net 30” method, which means customers are given 30 days to pay the invoice.

Step 2

Determine the month an account is aged. Your accounts are current while in the grace period stage. Begin aging during the month following the grace period month. For example, if unpaid invoices issued in February begin aging in March.

Step 3

Record aging dates. Unpaid invoices from the prior month show as 1 to 30 day accounts. Unpaid invoices from two months prior show as 31 to 60 day accounts. Unpaid invoices from three months prior show as 61 to 90 day accounts. Unpaid invoices from four months prior show as 91 to 120 day accounts.

About the Author

With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.