What an ageing report shows
An ageing report sorts unpaid invoices by how long they have been outstanding. It turns a single 'sundry debtors' figure into a picture of risk: money that is not yet due, money a few weeks late, and money that may never come. The older a receivable, the less likely it is to be collected, so the report tells you where to spend your follow-up time.
This template ages from the due date (invoice date plus credit days), not the invoice date, so a customer on 60-day terms isn't flagged as late on day 31. 'Not due' means the invoice is still within its credit period.
Using it for collections
The customer summary ranks customers by outstanding and shows how much of each balance sits in each bucket, plus a suggested follow-up. A practical rhythm: a polite reminder at 1-30 days overdue, a call at 31-60, escalation and a hold on new supplies at 61-90, and a decision on legal action or provisioning beyond 90 days. Tracking days sales outstanding (DSO) month by month tells you whether collections are getting better or worse.
Schedule III ageing disclosure
Since the 2021 amendment, Schedule III requires companies to disclose trade receivables and trade payables ageing in the notes, in buckets of less than 6 months, 6 months to 1 year, 1-2 years, 2-3 years and more than 3 years, split into undisputed and disputed amounts. Schedule III counts from the due date of payment, or from the date of the transaction where no due date is specified. An invoice-level register like this one makes that note easy to prepare.
Paying MSME suppliers on time
On the payables side, section 15 of the MSMED Act, 2006 requires a buyer to pay a micro or small enterprise supplier within the agreed period, which cannot exceed 45 days from the day of acceptance; where there is no written agreement, the limit is 15 days. If payment is late, section 16 makes the buyer liable to pay compound interest with monthly rests at three times the bank rate notified by the RBI.
Income-tax law also disallows a deduction for amounts owed to micro and small enterprises that remain unpaid beyond the MSMED Act time limit, until the year in which they are actually paid — section 43B(h) under the 1961 Act, carried into the 2025 Act. Confirm the current provision with your adviser. The Pro edition caps due dates at the MSMED limit for registered micro and small suppliers, flags overdue amounts and estimates section 16 interest.
Expected credit loss
Companies following Ind AS 109 may use the simplified approach for trade receivables: a provision matrix that applies a loss rate to each ageing bucket, based on past experience adjusted for current conditions. The Pro edition builds that matrix from your ageing and shows the provision required and the entry for the period.
Written by Prakash Bagchi, finance professional and founder of PB Lab. Last reviewed .