It is general assumption that risk of non-payment of debts increases with the age of receivables. It is due to number of events occur and change in economic condition of customer.
Aged receivable analysis identifies customers or invoices that are within due date and customers or invoices that are exceeding due date.
Customers are encouraged to pay within due date or customers exceeding due date should be follow up such as for interest receivable from customer on overdue invoices.
Aged receivable analysis helps deciding credit limits and credit terms to be set for sales.