What is the accounts receivable aging formula for contractors?

There are two formulas. First, aging balance by bucket: sum all unpaid invoices in a given date range (0-30, 31-60, 61-90, 90-plus days from invoice date). Second, days sales outstanding (DSO): divide total accounts receivable by total credit sales for the period, then multiply by the number of days in the period. DSO tells you the average number of days it takes to collect after invoicing. Run both on data from your accounting system, not your CRM or job management software.

What is a good DSO for a home-service contractor?

For residential home-service work, a DSO under 30 days is generally healthy because most customers pay on the day of service or within a few days. Commercial accounts or maintenance-agreement billing can carry longer terms by design, often 45-60 days, so separate your commercial and residential AR before benchmarking. What matters most is the trend: a DSO rising month over month for residential customers signals a collection or invoicing workflow problem worth addressing.

How does QuickBooks generate an AR aging report?

In QuickBooks Online, navigate to Reports and search for Accounts Receivable Aging Summary or Aging Detail. Set the aging method to invoice date and the interval to 30 days to get the standard 0-30, 31-60, 61-90, and 90-plus buckets. You can customize the columns and filter by customer type, which is useful for separating commercial from residential accounts. For contractors using QuickBooks Desktop, the same report lives under Reports, then Customers and Receivables.

What should I do with invoices in the 90-plus-day bucket?

Every invoice that reaches 90-plus days needs an explicit decision: (1) contact the customer directly with a final demand; (2) offer a settlement or payment plan to recover something; (3) send to a collections agency; (4) take to small claims court if the amount warrants it; or (5) write it off as a bad debt. Do not let 90-plus-day invoices sit unaddressed. They distort your reported revenue, inflate your AR balance, and compound into larger write-offs if ignored.

Why does my CRM show higher revenue than my bank balance?

Job management tools like ServiceTitan or Housecall Pro record revenue when a job is invoiced, not when payment is received. If you have outstanding invoices, your CRM revenue will always be higher than your collected cash. That difference is your accounts receivable balance. This is why running an AR aging report from your accounting system monthly, and reconciling it against your CRM, is essential for understanding your actual financial position.

How often should contractors run an AR aging report?

At minimum, once a month at period close, before you review profit and loss. For companies with high invoice volume or commercial customers on net-30 or net-60 terms, weekly reviews of the 31-plus-day buckets catch problems while there is still time to act. The goal is to identify past-due invoices and assign collection action before they age another 30 days. A live financial dashboard that surfaces DSO and past-due percentage continuously reduces the need to pull the report manually.

Can a KPI dashboard track accounts receivable aging automatically?

Yes, when a financial dashboard is configured to connect to your accounting system such as QuickBooks, it can display DSO, outstanding AR balance, and past-due percentage as standing KPIs updated continuously rather than in a monthly snapshot. Datacube's financial board, for example, can be built to consolidate QuickBooks receivables data alongside revenue, COGS, and labor percentage, so an owner or controller sees the full cash and profitability picture without opening QuickBooks separately.

What is the difference between AR aging summary and AR aging detail?

An aging summary shows the total balance owed by each customer broken into time buckets, without showing individual invoice line items. It is a quick overview of which customers owe what and how overdue they are. An aging detail shows every individual invoice sorted by customer and bucket, including invoice number, date, and amount. Use the summary for your monthly review and financial reporting; use the detail when you need to assign specific invoices to a collection action or identify which jobs are contributing to the balance.

Financials & cash flow

How to calculate accounts receivable aging for contractors

Accounts receivable aging sorts every unpaid invoice into time buckets and shows you which money is overdue, by how much, and whether it is still collectible. This guide covers the formula, what each bucket signals for a home-service company, and how to catch collection problems before they become write-offs.

By Datacube content engineAutogenerated

Accounts receivable aging is a report that groups every open invoice by how many days it has been outstanding. The standard buckets are 0-30 days, 31-60 days, 61-90 days, and 90-plus days. The older the bucket, the lower the probability that the invoice gets paid in full, and the faster a contractor has to decide whether to escalate collection or write it off.

For home-service companies, AR aging matters because the gap between invoiced revenue and cash in the bank is where financial surprises hide. An HVAC company billing $600,000 a month can look profitable in the CRM and ServiceTitan while carrying $80,000 in 60-plus-day receivables that will never fully land. The aging schedule makes that gap visible before it becomes a cash-flow crisis.

The accounts receivable aging formula

Two calculations underpin every AR aging report. First, the aging balance for each bucket: sum all invoices issued within that date range that remain unpaid. Second, days sales outstanding (DSO), which tells you how many days on average your receivables sit before collection.

DSO = (total accounts receivable / total credit sales for the period) x number of days in the period. A 30-day DSO means you collect within the month on average. A 60-day DSO in a seasonal plumbing or electrical business often signals that the invoicing and follow-up workflow is broken, not just that customers are slow.

Days sales outstanding calculator

Enter your total outstanding receivables and your credit sales for the period to see your current DSO. The result gives you a single number to track month over month.

Total accounts receivable (open invoices) ($)Total credit sales for the period ($)Days in the period (days)

Days sales outstanding (DSO)

8.5 days

A lower DSO means faster collection. Most contractors target under 30 days for residential work; commercial and large-project accounts often run longer by design.

This calculator is for estimation only. Actual DSO and collection timelines vary by trade, billing terms, customer mix, and accounting method. Reconcile with your controller and accounting system.

What to know before reading your aging report

AR aging groups open invoices by days outstanding: 0-30, 31-60, 61-90, and 90-plus. The further right an invoice moves, the more it costs to collect and the less likely it is to be paid in full.
DSO measures the average number of days between invoice and collection. It is the single summary metric that tells you whether your receivables workflow is getting faster or slower month over month.
For most residential home-service companies, a healthy AR balance sits mostly in the 0-30 bucket. Anything growing in the 61-plus buckets needs an action plan, not a spreadsheet update.
Invoiced revenue in your CRM and collected cash in your bank are two different numbers. AR aging is the report that shows you the gap between them in real time.
The 90-plus bucket is not just slow payment. It is where write-off decisions live. Track it separately from your other AR buckets so it does not distort your collectible balance.

What each aging bucket means for a contractor

Bucket (days outstanding)	What it usually means	Probability of full collection	Recommended action	Who owns follow-up
0-30 days	Invoice is current, within normal payment window	High (most residential customers pay here)	No action needed; confirm invoice was received	Billing admin or CSR
31-60 days	Overdue; customer may have missed the invoice or have a dispute	Moderate; most resolve with a prompt	Send a reminder and make a courtesy call; check for billing disputes	Billing admin or office manager
61-90 days	Significantly past due; collections risk rising	Lower; escalation usually needed	Escalate to owner or GM; consider a payment plan; review credit terms	Owner, GM, or controller
90+ days	Severely past due; may be uncollectible or in dispute	Low; write-off decision likely needed	Decide: collections agency, small claims, or write off; do not let it sit	Owner or controller

Warning

Common mistake: treating invoiced revenue as collected cash

The biggest AR mistake home-service owners make is reading revenue from their CRM or job management software and assuming it is cash in hand. ServiceTitan or Housecall Pro records a job as revenue when the invoice is generated, not when payment lands in the bank. A company with $2.1 million in annual CRM-reported revenue can have $140,000 in aged receivables eating into the actual cash position. Run your aging report from your accounting system, not from your job management tool, and reconcile the two monthly.

AR health scorecard: signals to review each month

Use these four signals to assess whether your receivables position is improving or deteriorating. Track them month over month rather than against a fixed benchmark, because thresholds vary by trade, billing terms, and customer mix.

Days sales outstanding (DSO)Rising DSO month over month is the early warning to act on
Good
Current
Under 30 days
Target
Match or beat prior month
Past-due balance as % of total ARAbove 25% typically signals an invoicing or follow-up workflow problem
Watch
Current
Under 15%
Target
Declining trend
Oldest open invoice (days)One large old invoice can distort your whole AR picture; track it separately
Watch
Current
Under 90 days
Target
No invoice older than 120 days without an action plan
Write-off rate (% of monthly revenue)Anything above 2% consistently is a sign that credit extension or invoicing needs tightening
Good
Current
Under 1%
Target
As low as possible
90-plus-day bucket balanceLeaving this bucket unaddressed is how write-offs compound over quarters
Poor
Current
Zero or near zero
Target
Addressed monthly

Metric	Current	Target	Status
Days sales outstanding (DSO)Rising DSO month over month is the early warning to act on	Under 30 days	Match or beat prior month	Good
Past-due balance as % of total ARAbove 25% typically signals an invoicing or follow-up workflow problem	Under 15%	Declining trend	Watch
Oldest open invoice (days)One large old invoice can distort your whole AR picture; track it separately	Under 90 days	No invoice older than 120 days without an action plan	Watch
Write-off rate (% of monthly revenue)Anything above 2% consistently is a sign that credit extension or invoicing needs tightening	Under 1%	As low as possible	Good
90-plus-day bucket balanceLeaving this bucket unaddressed is how write-offs compound over quarters	Zero or near zero	Addressed monthly	Poor

How to build and read an AR aging report for your contracting business

Step 1: pull from your accounting system. QuickBooks generates an Accounts Receivable Aging Summary under the Reports menu. Run it as of a specific date, typically month-end, and choose the 30-day bucket intervals. If your company uses another accounting package, the same report usually lives under Receivables or Collections. Never use your CRM report as the source for this analysis.

Step 2: look at the total and the mix, not just the total. A $90,000 AR balance is very different if $82,000 sits in 0-30 days versus $82,000 sitting in 61-plus days. The number alone tells you nothing. The distribution across buckets tells you whether collection is running normally or slipping.

Step 3: separate commercial and residential. Commercial accounts often operate on 45- or 60-day net terms by design. Lumping commercial invoices into a 30-day aging schedule makes your report look worse than it is and obscures actual residential collection problems. If you serve both customer types, run a separate aging schedule for each.

Step 4: assign an owner to every past-due line item. A past-due invoice that nobody owns is an invoice that will not get collected. Whether the owner is a billing admin for the 31-60 bucket or the GM for anything over 60 days, each line needs a name and a next action before the report is filed. The aging report is not a record; it is a task list.

Step 5: calculate your DSO and track it monthly. Once you have the total AR and total credit sales for the period, run the DSO formula. Write it down. Compare it to last month. DSO trending up over three months tells you a workflow or staffing problem is developing before it shows up as a cash shortage.

Connecting AR aging to a live financial dashboard

Running a monthly AR aging report manually in QuickBooks is a start. The gap is that most contractors pull it once a month, discover a problem that started six weeks ago, and spend the rest of the month chasing down invoices that are now 90-plus days old. A live financial dashboard that pulls from QuickBooks continuously surfaces DSO and the 61-plus-day bucket as a standing KPI, not a month-end ritual. When connected to QuickBooks financial reporting, a datacube financial board can display outstanding AR, past-due percentage, and DSO alongside revenue, COGS, and labor percentage, so the owner sees cash position and profitability together in one view.

Info

Owner takeaway: what slow AR costs in real numbers

Consider a plumbing company billing $250,000 a month with a DSO of 52 days instead of 28 days. The extra 24 days of float on that revenue means roughly $200,000 is permanently tied up in receivables at any given time rather than in the bank. That is cash that cannot be used to pay payroll, buy materials, or fund a truck. The math is illustrative and depends on your trade, margins, and customer mix, but the direction is consistent: every extra day of DSO costs you liquidity you could otherwise deploy.

Accounts receivable aging for contractors: common questions

See your financial KPIs in one live view

If you are pulling AR aging, COGS, and labor percentage from separate reports each month, a datacube financial dashboard can consolidate them alongside your CRM and marketing data into one board your controller and owner see daily. Book a demo to walk through what your financial view could look like.

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