Improve your cash flow forecasting: keep an eye on your aged creditors report

Who do you owe money to – and when? Of course, it’s much more exciting to think about what you’re owed than what you owe. But good business management is about having a three-sixty-degree view of the finances and your aged creditors report is key to forecasting. Along with the bank reconciliation and the aged debtors report, it’s the third of six key financial reports that you need to keep an eye on to successfully manage your business. So what does a ‘good’ aged creditors report look like and why does it matter? This blog explains.


What is an aged creditors report and why is it important?

Your aged creditors report gives you an overview of the businesses that have invoiced you, which you haven’t yet paid. Like the aged debtors report, it is split into columns and organised by time periods: typically ‘current’, ’30 days’, ‘60 days’.

The importance of the aged creditors report is its connection to cash flow forecasting. Knowing what bills are due, and when, gives you the foresight to make decisions about how you spend, budget and mitigate any unforeseen circumstances.


Your aged creditors report: what to keep an eye on

There are two things to watch out for when reviewing your aged creditors report (the signage may differ dependent upon the financial system used):

1. Positive balances – positive balances indicate money that you owe. These balances represent invoices that you have received, and have been processed onto your finance system, but not yet paid. They are an invaluable input into forecasting your financial commitments.

2. Negative balances – negative balances may indicate; i) that a payment has been made, but not matched to the corresponding invoice, or ii) that a supplier has given you a credit note that has not been matched against corresponding invoices. Either way these need to be investigated further because it may be that either a supplier owes you money, or some financial processes need to be reviewed.


Neglecting your aged creditors report carries serious risks

As an entrepreneur, we appreciate that financial housekeeping is probably not the match that lit your fire when you decided to start a business! However, it does pay to have a team you can trust looking after your finances, and also to know what questions to ask them to keep them on their toes!

If payments are not properly matched it could lead to invoices being paid twice. If supplier credit notes are not properly allocated you could be overpaying your suppliers, or not recovering money from them that they owe you. This can tie up cash unnecessarily which is not only inconvenient, in the worst-case scenario you may not get the money back. Though, hopefully, your business relationships are better than that!

Bear in mind also that older balances still need to be paid. If you don’t regularly review your aged creditors report, you could be caught out. Maybe that means you pay other bills late to

settle an old debt, face pressure when it’s time to pay staff or have less of a cushion for financial shocks.


Good financial management is good business

If your aged creditors report is not managed correctly, there are genuine risks. As with all of the reports we’ve looked at, staying on top of the aged creditors report helps you run a tight ship. And that leads to a more successful business! Make sense of the six financial reports you need to run your business effectively with the help of our free tool. It explains what to look out for, red flags to be aware of, and what to do about them. Download it here. And if you need to put a little more structure into your finance team, call us on 0117 244 1891.