These reports describe the distribution of the debt status in the organization according to the age of the debt. Since the older the debt, the more difficult it is to collect it, this segmentation is of great importance. The Ageing Report is a macro report that provides an indication of the credit risk and provides the collection manager a general view of the debtor portfolio under his responsibility. It is possible to derive from it several operational reports at the customer level as follows:
The chart-table below shows an example of an ageing report:
Table 40: Ageing report
| Customer | Outstanding debt | Not due | Overdue debt | |||||
| 0-30 | 31-60 | 61-90 | 91-120 | 121-150 | +150 | |||
| A | 1,320 | 150 | 150 | 300 | 300 | 0 | 0 | 420 |
| B | 2,230 | 0 | 0 | 0 | 0 | 1,450 | 780 | 0 |
| C | 600 | 150 | 150 | 150 | 150 | 0 | 0 | 0 |
| D | 980 | 300 | 680 | 0 | 0 | 0 | 0 | 0 |
| Total | 5,130 | 600 | 980 | 450 | 450 | 1,450 | 780 | 420 |
The “0-30” column in the table describes customers whose agreed payment time has passed, and they are one day to 30 days behind the due date. From the data in the table, it is possible to analyze the composition of the debts in arrears and make decisions about which customer needs to be handled first and whose turn will come later.
The table also provides a one-glance vision of the distribution of the debts and the efficiency of the collection process.
It also allows us to detect failures in the collection process. Customer A in this case has an open debt of 420 for more than 150 days and continues to accumulate debt in the shorter term.
There are several alternative versions of the crime report in the example, all depending on the nature of the organization, for example:
- Collection report according to the age of the debt, that is, from the date of the invoice or according to the customer’s entry into the collection process (to effectively measure the efficiency of the collection system).
- Ageing reports by agents or customer care centres, at the level of a team manager or the level of a senior manager.
- Ageing report by sales manager or sales agent level.
- Ageing reports by years. This last tool will help us to calculate the bad debt provision.
Collection volumes
Table 41: Collections volumes monitoring table
| Unit | Current month | Last month | Last quarter | |
| Sales | M | |||
| Total collections | M | |||
| Percentage of collections from Sales | % | |||
| Total new debt | M | |||
| Percentage of new debts from Sales | % | |||
| Overdue for more than 90 days | M | |||
| Percentage of 90 days overdue from Sales | % |
There are two variations of this report:
- All figures relate to the month they occur. This means the sales from January, all the amount collected in January, the new debt in January, and the 90 days overdue in January.
These figures will provide a snapshot of the month’s result and the impact of collections on cash flow. In a healthy company, we expect the total monthly collections to be close to 100% of the sales. It includes the debt paid on time for the month and the overdue debt from former months collected this month.
- All figures relate to the invoice month. In this case, each column includes figures that all relate to the same month of invoicing. In other words, if the Sales are the total of January invoice, then the total collections will include the collections of invoices of January, even if some of these amounts are collected later on. This will help us to understand the efficiency of each month and will allow us to compare them.
Percentage of collections from Sales
The organization aims to collect 100% of its turnover. We measure the total collection as the total collection of the organization – that is, the collection amount of the debts that are paid on time, the collection amount of the debts in arrears and the collection amount of debts from legal proceedings.
Ideally, we would expect the difference between the sales turnover and the total collection amounts to be exactly the amount of the organization’s bad debts. In practice, due to timing differences, this is not the case, and therefore we must analyze any change in the collection rate from sales to ensure the quality of the collection systems.
In a healthy organization over time, this index should reach over 99% depending on the percentage of bad debts of the organization.
Percentage of new debts from Sales
Although this is a similar index to the previous index, its meaning is very different. Here the test is monthly, and we are interested in knowing how much of the current month’s sales turnover was collected that month.
This is one of the most important indicators of the collection world, because any change in this index indicates the formation of a problem in the collection system, and a change in trend in this index predicts a change in trend in the other indicators of collection (debt status, debts over 90 days, collection costs and bad debts).
To quantify what is happening in the organization, we must monitor and analyze the debtor customers entering the debt circle and measure on a monthly basis the new debts added to the organization’s debt balance. The questions we would like to answer are:
- How many customers joined the circle of debts?
- Who are the customers? (customer size, importance to the business, business/personal, etc.)
- What is the amount of the new debts?
- What proportion of the cycle do we manage to collect without the need for pro-active collection?
- What is the distribution of payment methods for the new debts (in quantity and money)?
- Is there a deviation from the collection trend in one or more of the payment methods?
- Are the results of the month in an improving or worsening trend compared to previous months?
- How are the reasons for the customers’ non-payment distributed among the events? Type A event (cancellation of the customer’s payment method), Type B event (non-respect of the customer’s standing order), Type C event (non-payment on time of an invoice)?
- Cost of collection fees: tracking the total expenses and tracking the rates of the institutions that perform the clearing.
When all the data from the answers to the above questions is collected, data tables and graphs containing comparisons with previous months are obtained. These constitute the monthly dashboard of the credit and collection risk manager and enable analysis of the existing situation and the abnormal data (for example, an unexplained increase in debts). Then, practical decisions need to be made to improve the situation and instructions must be given to the collection department and/or the collection contact center.
We will present the monitoring of pre-collection treatment, treatment based on customer status and the pre-legal treatment in the section on collections contact centers.
Percentage of 90 days overdue from Sales
When the collection system is functioning in an efficient and high-quality manner, it is unlikely that customers will remain indebted to the organization for more than 90 days beyond the agreed credit terms. Debts over 90 days indicate that the collections systems and processes are not able to solve collection problems within three months and in this period also transfer to legal proceedings customers who are unwilling or unable to pay.
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