What Is an Aged Debtor?

In the financial world, an aged debtor is someone who has an overdue debt or who has had debt outstanding for a long time period. Institutions and other parties use this concept to assess outstanding debt from a financial perspective. This relates to the common goals and objectives related to collecting the outstanding debt.

The term, aged debtor, is often used in particular contexts. It’s now common for financial parties to talk about an aged debtor report, which shows how long specific debts have been outstanding, and how the outstanding debt amount has changed over time. These reports are useful in the greater context of age debtor analysis, something that companies often pay for, or hire outside consultants to do.

When analyzing aged debt, companies will frequently use specifically formatted reports in order to measure debt and aid in its eventual collection. These reports, often called aged accounts, will typically have specific time frames displayed on a graph or chart, along with the correlating debt amounts for each period of time that applies. For example, one of these reports may have columns or rows marked with 30 day, 60 day, 90 day, or 120 day indicators.

As companies pursue the collection of aged debt, they typically refer to in-house or independent consultants who specialize in evaluating aged debtor accounts. This kind of work involves human eyes looking at a computer represented pattern of debt, and thinking of the best strategies for eventual collection. Those who are working aged debt accounts often receive specific incentives for collected or “closed” accounts, giving them motivation to figure out how to collect the money.

Often, the modern collection of aged debtor accounts has a lot to do with following established procedures for debt collection. One of these is the contractual agreement; in many cases, a debtor and a lender have signed a specific contract that regulates debt collection and other aspects of the debt. Here, knowledge of the contractual agreement allows aged debtor account assessors to effectively close the account. The general legal system of the country in which the debt collection takes place also needs to be taken into account. With good strategy and compliance with the law, lenders are often able to minimize the cash loss imposed by aged debt accounts.