Which Is Not True Regarding The Accounts Payable Aging Report?

The accounts payable aging report is amongst the financial reports that give a clear view of unpaid bills and invoices. It represents the total of the amounts due to suppliers and vendors, differentiated according to the period over which they have remained unpaid. Another example is the aging report, which is used to track the large amounts of money owed to the business and the timeliness of payment on it: This aging report is important for the control of cash flows since it helps to make the list of the payments to be made and avoid extra charges for delay.

Here are some key things to know about accounts payable aging reports:

- It divides unpaid invoices into groups based on age and is mostly segmented into current, 30 days, 60 days, and more than 90 days. Some reports may have more subgroups or ‘buckets’ if you will.

- The company’s aging payables recapitulate the total amount to be paid for in each of the aging buckets to indicate where most of the payables are.

- It aids in analyzing trends on how many vendors are paying their bills on the later end of the due dates and on which aspects of the accounts payable process need enhancement.

- Holding more outstanding invoices means a higher probability of delayed fees from the suppliers or even service interruptions.

- It enables the planning of upcoming cash flow requirements as older invoices must be settled.

- The report generally does not include the charges or invoices that the concerned parties of the business may dispute or the invoices that may contain some errors.

- I think it is quite different from an accounts receivable aging report because the latter concerns the collection of money while this one concerns payment.

More specifically, except for the statement above, all the above statements are correct in depicting some of the crucial aspects of the accounts payable aging. The one statement that is NOT true is:The one statement that is NOT true is:

This is normally the section of the report that contains charges or invoices in dispute or containing errors that need to be reconciled.

A well-maintained aging report should be designed such that it only contains invoices that are an area of concern or invoices that are in a dispute or have issues requiring further clarification. Erasing mistaken invoices gives a clear picture of authentic payables and enhances control.

The rationale for strapping out contentious or suspect accounts is - that until the issue regarding the billing is settled or adjusted, the business may not in fact, be liable for the amounts billed. That is because their addition could lead to higher calculated current and past due payables than exist.

For instance, let it be that a vendor’s invoice is $100 for services which the business feels should only cost $75. What would be shown on the aging report, then, would be the undisputed amount and not the entire invoice. This helps to avoid the issue of overemphasizing and having to pay the amounts that are not deserved.

Or perhaps rounding off of figures in an invoice, making the payable to look higher, than it is mathematically. The exclusion from aging allows the vendor an adequate opportunity to correct and issue the correct invoice for the remaining balances genuinely due.

Employing this approach to omit the disputed and erroneous invoices from its reports allows a company to concentrate on collection follow-up of proper outstanding invoices. They also inform separated vendors that extra paperwork or revisions are required before making payment, and enable the organization to rectify different invoices on time. But at the end of the day, maintaining the aging reports properly is more beneficial to both the vendors and cash flow planning.

In summary, a truthful accounts payable aging report will:

- Except for accounts receivable, which should be aged on the number of days or months overdue.
- Total up outstanding receivables according to age groups
- Show in which areas payables and payments are largely found
- EXCLUDE charges that are being questioned or are inaccurate incurring more work before payment

By following this practice, it is also possible to have an accurate depiction of money that a supplier is rightly owed or the time when it should be paid through the accounts payable aging report.