Aging Schedule

  

You might think this is a list of your middle-age to late-age birthdays, and the relative humiliations that come with each: back pain, gluten-free cake, perfunctory birthday cards from your kids that arrive two weeks late, gluten-and-sugar-free cake, perfunctory birthday cards from your grandkids that arrive six weeks late, no cake, completely forgetting it's your birthday, and then, finally, death.

But no, the term "aging schedule" has to do with accounts scheduling in business.

An aging schedule is a way to arrange a company's invoices and bills according to when they are due. Basically, you are figuring out when money is coming in and when it has to go out. This helps you arrange the company's short-term capital needs. Run out of cash, and you're pretty much dead.

Aging of accounts receivable is a carefully tracked metric that bean-counters use to figure out how well the company is collecting its bills, for example. If that aging schedule moves meaningfully from one period to another, it usually signals that either the company's business is falling off a cliff, i.e. it's selling a lot less product, so it suddenly has a lot less in accounts receivable; if the aging term shortens, it might mean that buyers are leaping to their checkbooks to quickly pay off obligations to the company so that they can buy more.

Related or Semi-related Video

Finance: What is work-in-process invento...3 Views

00:00

finance- a la shmoop. what is work-in-process inventory? your company

00:07

junk in the trunk makes enema kits for Elephants . what they get stopped up too. [tower with "junk in the trunk" written on it]

00:12

just need you know big bags. anyway so you've extruded ten thousand bags. you

00:18

need ten thousand giant hooks to hang the bags on palm trees and ten thousand

00:23

tube thingies for the you know de new mall. they cost you a total of 60 grand

00:28

to produce and are not yet packaged. the product isn't finished.

00:32

in fact the rubber hosing and so on has to be made of a special material that

00:37

takes three months to fully dry. you know that African climate is hell on rubber.

00:42

you also have four tons of rubber in blocks sitting around the factory floor [ants crawl across the floor]

00:46

with ants singing to it. and you have a mile of wire you'll eventually Bend into

00:51

bag hanging hooks it's just sitting in a coil.

00:54

alright you paid for the rubber blocks, and the wire already it's just sitting

00:58

there so these elements of product are in process. the product isn't finished

01:03

completed or ready to ship. so work in process inventory really just consists

01:09

of raw materials at various stages of production. and you know generally work

01:15

in processes just sitting on the factory floor versus out the door when it then

01:19

becomes a finished goods. and just remember that concept for you next time

01:24

you're unpacking a pachyderm. [woman in white coat peeks out from behind an elephant]

Up Next

Finance: What are Accounts Payable and Accounts Receivable?
111 Views

What are accounts receivable and accounts payable? Accounts receivable and payable are figures that show up on a company’s balance sheet. Account...

Finance: What is inventory?
2 Views

What is inventory? From a financial perspective, inventory usually consists of A) raw materials for manufacturing products, B) products in the mids...

Finance: What is Inventory Turnover?
2 Views

Inventory turnover...way less delicious than an apple turnover. So...what is it?

Finance: What are Aging Receivables/an Allowance for Doubtful Accounts?
70 Views

What are Aging Receivables/an Allowance for Doubtful Accounts? The allowance for doubtful accounts subtracts those receivables that are not going t...

Find other enlightening terms in Shmoop Finance Genius Bar(f)