How lenders use it
Invoice finance and asset-based lenders lend against the sales ledger, so the report is the main document in the file. The credit team uses it to decide which invoices count towards the loan and how much to advance.
The lender looks at concentration, which is how much of the ledger one customer owes. It looks at the share of old invoices, usually over 60 or 90 days. It also looks at disputes, credit notes, customers who are linked to the borrower and customers known to be in difficulty.
Many lenders apply cross-ageing. If a set share of one customer's balance, say 50%, is over 90 days, the lender treats that customer's whole balance as ineligible. Lenders also check whether the report is aged from the invoice date or from the due date, because the two give different pictures.
The report must agree with the accounts. The total should match the debtors figure on the balance sheet, and the payments that arrive in the bank statements should match the customers on the report. A gap is a reason to ask questions.
Worked example
Example only. A business owes £400,000 on its ledger. Current invoices are £250,000. Invoices 31 to 60 days old are £90,000, 61 to 90 days old are £40,000 and over 90 days are £20,000. One customer owes £120,000, which is 30% of the ledger.
The lender excludes the £20,000 over 90 days, leaving £380,000. It caps the largest customer at 25% of the ledger, which is £100,000, so it counts £100,000 and not £120,000. Eligible invoices are £360,000. At an 85% advance, the lender would pay up to £306,000.
Common confusions
Aged debtors are not aged creditors. Debtors are customers who owe the business. Creditors are suppliers the business owes. Lenders ask for both, and they read them differently.
In invoice finance, a debtor is the borrower's customer. In general lending and insolvency, a debtor is the person who owes the lender. Check which meaning a page or document uses.
A report aged from the invoice date makes a 30-day-terms invoice look 30 days old on the day it falls due. A report aged from the due date shows it as current. The two reports are not comparable.
Questions lenders ask
What do lenders look for in an aged debtors report?
Concentration in a few customers, a large share of old invoices, disputes and credit notes, customers linked to the borrower and customers in trouble. They also check that the total agrees with the accounts and the bank statements.
What is an aged debtors report used for in invoice finance?
It decides which invoices are eligible, the advance and the credit limits per customer. The lender receives it at the start and usually every month after that.
What is cross-ageing?
It is a rule that makes all of a customer's invoices ineligible once a set share of its balance is overdue past a limit. It stops a lender from funding good invoices from a customer that has stopped paying.
How is an aged debtors report different from a debtor list?
The aged debtors report shows balances and ages. A debtor list names the customers and gives details, such as the registration number. Factoring lenders check the list for who the customers really are. The debtor ledger check tool covers that.
Related terms
- Invoice discounting: Borrowing against unpaid invoices, run by the business
- Management accounts: Up-to-date internal financial reports
- Working capital loan: Short-term funding for day-to-day costs
- Cash flow lending: Lending against earnings, not against assets
Related pages
- Factoring debtor ledger check
- Intake for factoring companies
- Klarefi for independent business lenders
- All glossary terms
This page is general information for lenders. It is not legal, tax or credit advice.