Accounts Receivable Aging Review
Mandatory corporate policy governing the systematic review, escalation, and resolution of outstanding receivables by aging bucket. Designed to minimize bad debt exposure, enforce payment discipline, and maintain liquidity targets across all vendor and customer accounts.
This policy establishes a standardized, repeatable framework for reviewing all outstanding accounts receivable on a monthly basis. Receivables are segmented into 0–30, 31–60, 61–90, and 90+ day aging buckets. Each bucket carries distinct escalation actions, communication templates, and approval requirements. The policy applies to all trade receivables, intercompany balances, and vendor notes receivable. Adherence ensures timely identification of delinquent accounts, reduces write-off risk, and aligns with corporate working capital targets. All AR staff, credit managers, and finance leadership must comply with the review cadence, documentation standards, and escalation triggers defined herein.
This policy applies to all wholly owned subsidiaries, divisions, and business units of the corporate entity that generate trade receivables, including domestic and international customer accounts. It covers all receivable types: standard invoice terms, progress billing, milestone payments, and vendor notes. Third-party managed AR portfolios and factored receivables are excluded unless specifically adopted by contract. Any department or branch that bills external customers must adhere to this aging review policy. The minimum threshold for mandatory escalation is CAD $1,000 per invoice or CAD $2,500 aggregate per customer; accounts below these thresholds may be handled via standard dunning procedures without formal committee review.
- Monthly Aging Snapshot: Every account with an outstanding balance must be aged and reviewed by the 5th business day of the following month. The aging report must be generated from the ERP system, not manually reconstructed.
- Bucket Escalation Triggers: 0–30 days: standard reminder. 31–60 days: formal demand letter. 61–90 days: credit hold + supervisor approval required. 90+ days: referral to collections or legal review committee.
- Documentation Mandate: Every escalation step must be logged in the AR system with date, action taken, customer response (if any), and next review date. Missing documentation = non-compliance.
- Approval Hierarchy: Write-offs, payment plan extensions beyond 90 days, and settlements below invoice value require dual approval — AR Manager + Finance Director. No exceptions.
- Bad Debt Reserve Triggers: Any invoice aged 90+ days must be automatically flagged for bad debt reserve calculation at 50% of outstanding value. At 120+ days, reserve must increase to 100% unless specifically overridden by CFO.
- Accounts Receivable Clerk / Analyst: Generate monthly aging report, execute dunning communications, log all actions in AR system, flag accounts approaching escalation thresholds.
- AR Manager: Review all accounts 31–60 days past due, approve credit holds, authorize payment plans up to 90 days, present 90+ day accounts to Finance Director.
- Finance Director / Controller: Approve all bad debt reserve adjustments, settlement agreements, and write-offs. Chair the monthly AR Review Committee meeting.
- Collections Agency / Legal Counsel: Handle all accounts referred at 90+ days. Provide monthly status updates to Finance Director. Initiate legal proceedings only after CFO sign-off.
- CFO / Treasurer: Final authority on reserve methodology, large settlement approval (>$50k), and coordination with external auditors on AR valuation.