Using an accounts payable aging schedule can help you determine how well you are (or aren't) paying your accounts payable. If the schedule indicates that you have some bills that are past due, you may be relying a little too heavily on your trade credit. It could also indicate that you aren't managing your cash flow the way a successful business should.
An accounts payable aging report looks almost like an accounts receivable aging schedule. However, instead of showing the amounts your customers owe you, the payables aging schedule is used for listing the amounts you owe your various suppliers — a breakdown by supplier of the total amount of your accounts payable balance. Most businesses prepare an accounts payable aging schedule at the end of each month.
A typical accounts payable aging schedule consists of 6 columns:
The number of columns can be adjusted to meet your reporting needs. For instance, you might prefer listing the outstanding amounts in 15 day intervals rather than 30 day intervals.
The following is a sample accounts payable aging schedule from Fortmann's Hawkeye Haven:
|Accounts Payable Aging Schedule
Fortmann's Hawkeye Haven
December 31, 2001
Days Past Due
|31-60 Days Past Due||Over 60 Days Past Due|
|Citizen Press Daily||2,800||2,600||200||----||----|
|Enneking Insurance Co.||400||400||----||----||----|
|Roth Office Supply||600||600||----||----||----|
The accounts payable aging schedule is a useful tool for analyzing the makeup of your accounts payable balance. Looking at the schedule allows you to spot problems in the management of payables early enough to protect your business from any major trade credit problems. For example, if Jansa Distributing was an important supplier for Fortmann's, then the past due amounts listed for Jansa Distributing should be paid in order to protect the trade credit established with this supplier.
The schedule can also be used to help manage and improve your business's cash flow, especially when projecting your cash outflows for a cash flow budget. Amounts listed in the current column will need paying sometime in the near future — possibly 30 or 60 days. The accounts payable aging schedule gives you a good indication of the amount of cash needed to cover your expenses during the same time period. Using the example schedule above, Fortmann's Hawkeye Haven will need to generate at least $7,750 in income to cover the current month's purchases on account.