Accounts Receivables Beyond 60 Days

Accounts Receivables Beyond 60 Days

KPI Details

The percentage of accounts receivable (AR) beyond 60 days is a good indicator of potential charge-offs (i.e., debt that will likely go uncollected), and may speak to the quality of the organization's credit analysis, invoicing and collections methods. A relatively high rate of AR that is 60 or more days delinquent may impact the organization's profitability, or in extreme cases, its ability to meet short-term cash obligations. Underlying factors that can contribute to account delinquency include lack of proper credit analysis (i.e., credit extended to individuals who may not be credit-worthy), unclear or inconsistent invoicing methods, lack of convenient payment options (e.g., payments cannot be made through the internet, etc.) for customers, non-standard methods for contacting customers in early-stage delinquency and/or ineffective collections processes.

KPI Definition

The dollar amount of accounts receivable (i.e., money owed to the company) that are 60 or more days past due at a certain point in time divided by the total dollar amount of accounts receivable at the same point in time, as a percentage.

KPI Best Practices

• Notify customers of outstanding payments at regular intervals (weekly, bi-weekly, etc.)
• Offer online payment options for customers to speed up invoice processing time
• Determine payment options that are appropriate for debtor to encourage payment (lump sum, recurring payments, etc.)

KPI Calculation Instructions Accounts Receivables Beyond 60 Days?

Two values are used to calculate this KPI: (1) the total dollar amount of accounts receivable (AR) that is 60 or more days past due at a certain point in time, and (2) the company’s total AR balance at the same point in time. The dollar amount of AR beyond 60 days is simply counted as the total balance (including any late fees or interest charges levied against the account) of all accounts receivable that are 60 or more days delinquent (from the original payment due date) at the time of measurement. The company’s total AR balance includes the total dollar amount of money owed to the company (including current and delinquent account balances).

KPI Formula :

(AR Balance 60 or More Days Past Due / Total AR Balance) * 100