Receivables collectability review: assessing overdue balances at close

Match customer balances to the ledger and investigate unapplied receipts, credits, duplicate invoices, and incorrect due dates. An aging report can overstate collection problems when payments or adjustments have not been applied.

Use consistent aging buckets and a clear reporting date. Keep different entities or currencies identifiable so a customer balance is not misunderstood.

Review payment history, confirmed remittances, disputes, payment plans, and other information relevant to the balance. Ask the account owner what changed and retain the basis for their assessment.

An invoice being thirty days overdue is useful evidence, but age alone may not answer whether it will be collected. A disputed current invoice and a longstanding customer payment delayed by a documented process can have different risk.

Ask the accountant to apply the company's policy and reporting framework to allowances, impairment, or write-offs. Tax deductions for bad debts have their own rules and should be assessed separately by the tax adviser.

For illustration, a $20,000 receivable may include $5,000 under a documented dispute. That does not automatically mean the full $5,000 must be written off, but it identifies an amount needing review and a collection action.

An accounting adjustment should not silently end collection activity, and a collection promise should not automatically reverse an allowance. Document the basis for both decisions.

Define who approves write-offs, customer communication, and any further action. Preserve the original invoice and supporting history.

Save the reviewed aging, customer evidence, policy assessment, entries, and exceptions. Roll the schedule forward through new invoices, receipts, credits, and approved adjustments.

Use recurring collection problems to review terms, deposits, billing accuracy, and customer approval processes. The reporting objective is an explained receivable balance and a realistic cash assumption, with material uncertainty visible to management.