Accounts Payable Aging Schedule

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:

  1. Column 1 lists the name of each your suppliers with an outstanding bill.
  2. Column 2 lists the total amount you owe to each of the suppliers.
  3. Column 3 is the current column. Listed in this column are the amounts you owe to your suppliers for purchases made during the current month. Amounts listed in this column aren't past due yet.
  4. Column 4 lists the amounts you owe to your suppliers that are 1 to 30 days past due.
  5. Column 5 lists the amounts you owe to your suppliers that are 31 to 60 days past due.
  6. Column 6 lists the amounts you owe to your suppliers that are over 60 days past due.

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
Supplier's Name Total
Accts. Payable		 Current 1-30
Days Past Due		 31-60 Days Past Due Over 60 Days Past Due
Hove Advertising $1,600 $1,600 ---- ---- ----
Citizen Press Daily 2,800 2,600 200 ---- ----
Jansa Distributing 1,000 600 100 300 ----
Bradley's Bookkeeping 600 300 300 ---- ----
TrueBrew Unlimited 2,000 1,100 500 400 ----
Enneking Insurance Co. 400 400 ---- ---- ----
Roth Office Supply 600 600 ---- ---- ----
Handy Hardware 350 350 ---- ---- ----
Total $9,350 $7,550 $1,100 $ 700 ----

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.

 
Tip

If you're using one of the many available accounting software packages for tracking your accounts payable and recording your expenses, check it first to see if it prepares the aging schedule automatically. Most accounting software packages will prepare an accounts payable aging schedule at the touch of a button!