What accounts receivable means
The FDIC's Money Smart for Small Business cash flow module defines accounts receivable as money owed to a business by its customers for goods or services delivered but not yet paid for. For a truck repair shop, that is mostly invoices to fleet customers on net terms.
How an aging report works
The report lists each customer and splits the balance into age buckets. Some shops age from the invoice date, and others from the due date. Either works if it is used consistently. A typical layout shows, for each customer, the current amount, then amounts past due by range, and a total.
How shops use it
- Weekly review: look at every balance past due and assign a follow-up.
- Follow-up schedule: a reminder near the due date, a call shortly after, and a statement at 30 days past due. See statement billing.
- Credit decisions: pause new credit work for customers with old balances until they catch up.
- Cash planning: expected collections help predict cash for payroll and parts.
Old balances and bad debt
The longer an invoice goes unpaid, the harder it can be to collect. The IRS explains in Topic 453 that a business bad debt deduction generally requires that the amount was previously included in income, and that you show you took reasonable steps to collect. Cash-method taxpayers generally cannot deduct unpaid fees as bad debts because the income was never reported. Ask your accountant how this applies to your shop, and keep a record of every collection step.
Related: days sales outstanding, net 30.
MetaFleet supports invoicing with per-customer terms printed on every invoice, payments with pay links, and reports. Get a walkthrough.