Accounts Receivable Aging Analysis in Excel for Better Financial Health

[@Loi_VietViet]

Let's say we have $1000 sales on credit with customer ABC currently in the "0-30" bucket. Customer ABC pays $700 on day 30, and enters into dispute for the remaining $300. On day 61, he agrees to pay only $200 of the remaining $300 sitting in the "31-60" bucket. So we know for sure $100 of the $1000 is bad debt. In short 70% goes from "0-30" to "Paid" bucket. & 30% goes to "31-60" bucket 20% goes from "31-60" bucket to "Paid" bucket & 10% goes to "Bad Debt" bucket. How do you track above to fully capture the true cash flow with Excel without aggreating the data?

[@MintyAnalyst]

Hey here, thanks for the comment! 😊 I'm not sure I understand the question - if you want to track the actual cash flows, you wouldn't rely on an ageing analysis, as it is something we use at a certain point, so it's a snapshot, not an overview of continuous cash flows. One way to track the changes is to create an ageing analysis periodically and calculate the changes. However, this becomes a bit tricky, as apart from new invoices and settled ones, you also have jumps from category to category which pollute the overall picture. However, if you have an export of sales you can adjust the change by adding back the sales amount for each customer and be left only with the settlement as a change. Your buckets analysis won't work that well, but you'll know the overall movement and the current categories. As for tracking consecutive transactions per each customer, you can either analyze this on a per customer basis (which won't give you the full AR picture), or you can perhaps export all AR journal entries and summarize new sales/settlements per customer per day/week/month (whatever works). In my opinion, however, this should be something done separately from the ageing analysis. The AR ageing analysis, in my view, is a cash position analysis showing how well we are managing receivables and helping us identify potential issues with collectability, not a running analysis of specific customer balances and settlements. Not sure if this answers your question, but I hope it's helpful 😅

[@Loi_VietViet]

@@MintyAnalyst There is a need to capture the flows of AR from one bucket to another one so one can apply Markov Chain with absorbing states to the aging of AR to set-up bad debt reserves for financial reporting.

[@mohammadsahilsiddiqui8995]

Please provide excel exercise file 📁

[@MintyAnalyst]

You can check the sample file in this article I wrote back in the day: magnimetrics.com/accounts-receivable-aging-report-in-excel/