Receivables Aging Report: Collect on a Schedule, Not Memory

A receivables aging report shows every unpaid invoice by its age, counted from its due date, in buckets the owner chooses, so whoever follows up collections knows where to start today. But the report alone collects nothing. What collects is a schedule for every invoice: a reminder before the due date, on it and after it, then a known escalation to the account manager and the owner, a hold on new deliveries applied by the system, a log of every call with its outcome and any payment date the customer promised, and a monthly statement that confirms the balance. And if the debt still stays unpaid, this part sets out what the law says about an unpaid promissory note and about VAT on a debt that was never collected.

From the dispute log to following up every invoice

In part five the invoice started going out on time and reaching the person authorized to approve it, and every dispute got an owner and a date. What remains is what happens next: a correct invoice, with no dispute, delivered to the right person, that is not yet due, or was due and the date has passed. In many companies, following up these invoices lives in one person's memory or in a spreadsheet updated at month-end. The spreadsheet is a good tool, and an accountant who knows every customer by name is real value to the company, but memory slips in three places that keep recurring:

• Priority goes to whoever answers the phone. The team calls the customer whose number they know and who answers quickly, while invoices for less responsive customers grow without anyone asking about them.
• A payment promise nobody follows up. The person at the customer says the payment goes out on Thursday, Thursday passes, and only the person who heard the promise knows it was a date.
• A new delivery to a customer who is behind. The warehouse or the site team cannot see overdue invoices, so a new order goes out to a customer whose deliveries were supposed to stop until they paid or an exception was approved, as we agreed in part three.

None of this means the customer is dodging payment or that your team is careless. Most delays, as we have seen in this series, are a missing document, an invoice with the wrong person, or a dispute with no owner. Organized follow-up surfaces those causes early, before a small invoice turns into an old balance whose story nobody remembers.

The aging report: by due date, in buckets the owner sets

The age of a debt is counted from the invoice's due date, not its issue date. An invoice issued a month ago whose term has not yet run out is not overdue, while one issued two weeks ago on a shorter term may be overdue today. So a correct report starts from the payment terms the owner set for each customer in part three: the system calculates each invoice's due date from its date and its customer's terms, then spreads the balance across buckets:

• Not yet due. This bucket matters too, because it is what you expect to collect over the coming weeks.
• Overdue, split into time buckets the owner sets according to their own payment terms and the nature of their customers. No set of buckets is right for every company: a distributor selling on short terms needs narrower buckets than a contractor waiting for progress claims to be approved.
• Disputed, pulled separately from the dispute log in part five, so it does not mix with ordinary overdue amounts and collections does not chase it before it is resolved.
• Retentions for a contractor, on a separate line with their release condition, because they are money not yet due rather than an overdue debt.

The report is read at two levels: the customer level, to see who owes the largest overdue balance, and the invoice level, to see which specific invoice it is and what its story is. A single line in a good report answers three questions without opening another file: how old the invoice is, whether it is disputed, and what last happened with it and when.

The collection calendar: what happens to each invoice, and on which day

The report is a picture of today; the collection calendar is what happens tomorrow. Every invoice gets a calendar that starts the day it is issued. The owner sets its steps and timings for each customer or group of customers, and the system reminds whoever owns each step on its day:

• Before the due date: a message to the authorized person at the customer with the invoice number, amount and due date, along with a copy of the invoice and the signed delivery note. This message catches early an invoice that never arrived or is missing a document, and it is the easiest step in the calendar and the one with the most effect.
• On the due date: a short reminder that the invoice is due today.
• After the due date: a call from the collections team, then a written reminder, at times the owner sets.
• Escalation: if the invoice passes a set point with no payment and no recorded promise, it moves to the account manager who knows the customer, then to the owner or their delegate.

Automated messages do not mean the relationship loses its personal touch. Your team writes each message in its own voice, it goes out through a channel the customer knows, such as email or WhatsApp, and the call is still a call made by someone who knows the customer. What changes is that nobody has to remember that today is this invoice's date. It is the same logic we described for rent in Collection and Renewal: A Process, Not a Memory, applied here to invoices for companies that buy from you on credit.

Escalation is also where the hold on new deliveries comes in. In part three we agreed that an order stops at a known point if the customer has an invoice past its due date or a balance above their limit. Here the system takes the hold directly from the collections data: the sales rep and the person in charge of the warehouse or site see that this customer is on hold and why, and the hold lifts when the payment is recorded, or through a recorded, approved exception as in part three. The hold no longer depends on someone remembering, and it does not stay in place after the customer has paid.

The call log, payment promises and the monthly statement

Every contact with the customer is logged in one line on the invoice: who called, when, who they spoke to, and the outcome. The outcome comes from a fixed list, as in the dispute log: a promise to pay, a request for a document, a new objection passed to the dispute log, or no answer. If the outcome is a promise to pay, its date and amount are recorded and it becomes a date in the calendar: on that day the system checks whether the money arrived, and if it did not, the line goes back to whoever recorded the promise. Recorded promises have a second use we come back to in the final part: they are the most accurate thing the company knows about the money expected over the coming weeks.

Then the monthly statement, the mirror image of the supplier statement reconciliation we described from the buyer's side in Paying Suppliers on Schedule and Reconciling Statements. At the start of each month every customer receives a statement of their open invoices, recorded payments, credit and debit notes, and the month-end balance, with a request to confirm the balance or explain the difference. Any difference the customer reports is classified the same way as a supplier statement difference: an invoice they never received, a payment in transit, a note not yet issued, or an invoice recorded twice. A statement the customer confirms closes the door on arguments over old balances, and a statement they dispute shows the problem while it is still small.

When the customer does not pay: what the law says about promissory notes

Most invoices are collected through follow-up, and some are not. Before any escalation, know what you hold. In part three we described the electronic promissory note on the Nafith platform as a guarantee the owner chooses for some customers, not all of them. This is what the law says when such a note is not paid on its date:

• Commercial papers are enforcement instruments. Article 9 of the Enforcement Law states that compulsory enforcement may only proceed on an enforcement instrument for a right of a specified amount that is due, and item 4 lists commercial papers among those instruments; a promissory note is a commercial paper. An unpaid note can therefore go to enforcement without a lawsuit first.
• The automated track on Najiz. The Ministry of Justice guide to enforcement request services explains that a note issued on an approved electronic platform such as Nafith is filed on Najiz through the automated track (the virtual court), where the procedures run automatically under the supervision of the judicial circuit.
• The defaulting debtor. Article 46 of the Enforcement Law states that if the debtor does not pay, or does not disclose assets sufficient to settle the debt, within 5 days of being notified of the enforcement order, they are considered a defaulter (مماطل), and the enforcement judge immediately orders measures that include a travel ban and notifying a licensed credit-information company of the non-payment.

That is what the texts say, not a step the collections team takes or the system decides. What the system does is prepare the complete file when the owner and their lawyer need it: the invoice, the signed delivery note, the reminders sent, the calls and their outcomes, the promises not kept, and the last statement the customer confirmed. Any decision to go legal, whether or not a note stands behind the invoice, and its timing and effect on the relationship, belongs with your lawyer.

A debt never collected: what Article 40 says about output VAT

When you issue an invoice, its VAT goes into your return and you pay it to the Authority, whether or not you collect the amount from the customer. If the debt stays uncollected, paragraph 7 of Article 40 of the VAT Implementing Regulations allows you to reduce your output VAT by the tax calculated on the unpaid consideration, in the return in which all of these conditions are met:

• You previously included the VAT on this supply as output tax in your return and paid it.
• The supply was made to a person not related to you.
• At least 12 months have passed since the date of the supply.
• You provide a certificate from a licensed chartered accountant approved in the Kingdom showing that the debt was written off in the commercial books; the Authority may accept other supporting documents if your business is not required to appoint an auditor.
• Where the unpaid amounts exceed 100,000 riyals and the seller has formally started legal proceedings without result, the text says the seller can provide evidence of those proceedings, such as a court judgment, the debtor's bankruptcy, or a court order starting a formal procedure that proves the claim. The wording does not settle whether that evidence is required for every debt above this amount, so ask your tax adviser about your case.

Paragraph 8 states that a business using the cash accounting basis set out in the Regulations does not make this adjustment. Paragraph 9 states that if you reduced your output VAT and later receive all or part of the amount, VAT becomes due on what you received in the return for the period in which it was paid, and a new tax invoice reflecting the amount received must be issued. On the other side there is a paragraph for the buyer who has not paid, paragraph 10 of the same article, which we covered in part six of the purchasing series.

In practice this needs a list, not memory. A system that holds the supply date of every invoice and what has been collected on it shows the debts approaching 12 months since their supply, with the full follow-up file attached, so they reach the finance manager and their tax adviser before the return is prepared, not after. The flag is an alert, not a ruling: whether the text applies to a particular debt, when it is written off and how the return is adjusted is decided by your tax adviser and your chartered accountant.

The Origami view

When we build the collections workflow for a company, we start from its overdue invoices today: who is following each one, where the last call was recorded, which payment promise passed without anyone noticing, when the last statement was sent, and whether a delivery went out to a customer who should have been on hold. Those answers map the current workflow as it really is, before we draw a single screen.

Then we turn them into one connected workflow: an aging report from the due date with buckets the owner adjusts without a programmer; a collection calendar for every invoice that reminds the owner of each step on its day; a known escalation path; a delivery hold the system applies and a payment lifts; a call log where every promise becomes a date; a monthly statement that is sent and whose confirmation is tracked; and a list of old debts that reaches your tax adviser before the return, all connected to your accounting system and e-invoicing. This is part of the custom systems we build through our services.

An exercise for this week: build your aging report by hand

Before any system, you need an honest picture of what is waiting to be collected. This is an exercise for the finance manager and the sales manager in a single session:

• Pull the open invoices for your twenty largest credit customers, and work out each invoice's due date from the written payment terms, not from its issue date.
• Spread them across buckets you choose: not yet due, then the overdue buckets that suit your terms, and separate out disputed amounts and retentions.
• Next to each overdue invoice, write the last contact about it: when, who made it, and the outcome. If you find nothing written, write that down.
• Gather the payment promises made in the past month, and check how many were kept on time.
• Check recent deliveries: did an order go out to a customer with an overdue invoice and no approved exception?

The number of overdue invoices where nobody knows what last happened, and the number of promises whose date passed without follow-up, are the baseline for this part.

In the next and final part

Every invoice now has an age counted from its due date, a calendar that follows it, and a log that keeps every call and promise. The seventh and final part is about the money when it arrives: matching each bank transfer to the invoices it pays, what to do with a transfer that has no reference or a payment short of the invoice, then a week-by-week view of cash flow from due dates and recorded promises set against supplier payments, and finally a ninety-day plan for digitizing sales in an order that never stops selling for a single day.

Sources

• Zakat, Tax and Customs Authority: Implementing Regulations of the VAT Law (official Arabic text) — Article 40, paragraph 7 (conditions for reducing output VAT on unpaid consideration; sub-paragraph (d) amended by the Authority's board on 15 June 2023), paragraph 8 (the cash accounting exclusion), paragraph 9 (VAT due and a new invoice when the amount is collected later), and paragraph 10 (the input VAT adjustment for a buyer who has not paid).
• Enforcement Law, Royal Decree M/53 of 1433H, Ministry of Justice legal portal (Arabic) — Article 9 (enforcement instruments, including commercial papers in item 4) and Article 46 (the defaulting debtor and the measures the enforcement judge orders, including a travel ban and notifying a licensed credit-information company).
• Ministry of Justice: Guide to Enforcement Request Services on Najiz, second edition (Arabic) — filing an enforcement request for an electronic promissory note on the automated track (the virtual court) for notes issued on approved electronic platforms such as Nafith.