How to perform aging analysis of prepayments? How to identify invoices not returned for over one year
The real value of aging analysis lies not in that report, but in Can we click in to see exactly which supplier, which payment, and who handled it?。An aging table with only totals and percentages will prompt management to ask "what are those, exactly?" and then the matter stops there.
How to divide aging intervals
| Interval | Degree of attention | Usual meaning |
|---|---|---|
| Within 3 months | Normal | Within the business cycle, it is normal in-transit |
| 3 to 6 months | Follow | Starting to Deviate from Normal Pace, Requires Follow-up by the Person in Charge |
| 6 to 12 months | Key points | Most have exceeded the contract agreement and require intervention by the department head |
| Over 1 year | Risk | Involving pre-tax deduction risks, requiring special handling |
Interval division does not need to be copied exactly; the key is Match the company's business cycle. Engineering prepayment cycles are inherently long, so using 3 months as the first tier is meaningless; while for office supplies, prepayments exceeding one month should be questioned. If conditions permit, set intervals separately by business type.
Two drill-down dimensions that must be supported
Drill down by supplier: View how many invoices a supplier has not returned in total and in which aging brackets they are distributed. If the same supplier has balances in multiple aging brackets, it indicates a long-term issue, and the cooperation approach may need to be reassessed.
Drill down by payment order: View the payment date, amount, handler, expected invoice return date, and days overdue for each transaction. This is the direct basis for collection follow-up.
An aging table with only totals and no drill-down is equivalent to turning the problem from "not knowing how much" into "knowing how much but still not knowing what to do."
The portion exceeding one year must be handled separately
This part involves pre-tax deduction for corporate income tax.Pre-tax deduction vouchers need to be obtained before the end of the annual tax settlement period, long-term expenses without invoices carry the risk of being non-deductible.
It is recommended to assess three things for this portion on a transaction-by-transaction basis: whether the supplier still exists, whether the payment may still be invoiced or refunded, and whether a tax adjustment is needed at the annual corporate income tax settlement. Assessment conclusions should be recorded in writing.
At the same time, it is necessary to judge the recoverability of this prepayment itself. If the supplier has become unreachable or deregistered, this is not just an invoice issue but an asset impairment issue, which needs to be handled according to bad debt policy.
Transformation from analysis to action
The most common thing that happens after aging analysis is completed is this: the report is produced, and then nothing else happens. To make it drive action, the analysis results need to be connected directly to the collection process:
Automatically generate to-dos by aging bucket:Those of 3 to 6 months are forwarded to the handler, those of 6 to 12 months are copied to the department head, and those of more than 1 year enter the special finance list and require a written explanation。
In this way, aging analysis is no longer a table glanced at once at month-end, but a mechanism that automatically generates to-dos every month.
Prerequisite for data accuracy
The data source for aging analysis is the pending invoice receipt ledger. If the ledger itself is maintained manually and not reconciled promptly after invoices are received, the aging data will be wrong—documents that have already received invoices will be counted as overdue, and truly overdue ones will be missed.
So before doing aging analysis, confirm one thing first:Does invoice return write-off happen automatically?. If you still have to rely on finance staff manually changing the status in the ledger, the credibility of this report is questionable.
How is this scenario handled in Kailing Technology's expense control system?
Aging intervals can be configured separately by business type, supporting drill-down by supplier and payment document to specific documents and handlers. Invoice receipt reconciliation is completed automatically as invoices are recorded, keeping aging data accurate in real time. Analysis results automatically generate tiered to-dos: 3 to 6 months are pushed to handlers, 6 to 12 months are copied to department heads, and over 1 year enters the finance special list.
Learn about the Kailing Technology expense control and reimbursement system →
Common Questions
Match the business cycle. Engineering prepayments have long cycles; office-related ones should be questioned after more than one month, and where conditions allow, set them separately by business type.
Two dimensions: supplier and payment order. Having only totals without drill-down is equivalent to knowing there is a problem but not knowing what to do.
Assess supplier by supplier whether it still exists, whether it can still issue invoices, and whether tax adjustments are needed, with conclusions recorded in writing. Also assess the recoverability of the prepayment itself.
Most cases are caused by manual backfilling for invoice return write-off. Before doing analysis, first confirm whether write-off occurs automatically.