What your aged receivable report is actually trying to tell you

Most agency owners look at their aged receivable report once a month, wince at the 90+ number, and move on. That's backwards. The 90+ bucket is where problems go to die. The useful information is in the buckets before it.

I've sat through enough month-end reviews to know that a bloated receivable report almost never has one cause. It has two or three, layered on top of each other, and each bucket is pointing at a different one. Once you know how to read the shape, you can stop treating the whole report as a single problem.

What the current bucket is actually showing you

A healthy current bucket should be large relative to the others. That's obvious. What's less obvious is how large.

If your current bucket is running at, say, 85% of total receivables and the remaining 15% is spread thinly across 30, 60, and 90+, you're in reasonable shape. If current is sitting at 55% and the rest is stacked in the aging buckets, your billing cycle is the first place to look, not client behavior.

Specifically, ask when invoices are going out relative to policy effective dates. At our agency, we found a 9-day average lag between effective date and invoice delivery. Nine days sounds minor. On a 30-day payment term, you've already given away 30% of the window before the client even knows they owe you. Fix the lag and the current bucket grows on its own.

The 30-day bucket is a producer problem

This is the opinion that will annoy some people: if you have consistent volume in the 30-day bucket, your producers are not following up. Full stop.

Clients who are 30 days out are not in financial distress. They're busy, or they forgot, or the invoice went to the wrong contact. One phone call or a firm automated reminder at day 22 clears the majority of these. If those accounts are sitting at 31-45 days, it means nobody made that call.

I know agencies that have producers touch every open receivable over $500 at day 25. Their 30-day bucket runs at under 4% of total AR. Agencies that leave follow-up to the account manager or, worse, to the client to self-initiate, routinely carry 12-18% in that bucket. The difference isn't the clients. It's the process.

Pull a list of what's sitting at 30 days and sort it by producer. The pattern will be obvious in about four minutes.

The 60-day bucket is a mixed signal

This one requires more detective work because it's where billing problems and client problems start to overlap.

Some of what lands at 60 days is invoices that left late, never got followed up at 30, and are now just older versions of the same billing failure. Some of it is genuinely distressed clients who are slow-paying across all their vendors. You need to separate those two populations before you do anything.

Here's the quick test: look at the client's payment history over the past 18 months. If they've historically paid in 20-25 days and they're now sitting at 62 days, that's a flag worth a real conversation. If they've been a 45-55 day payer for three years and nobody ever pushed back, that's a process failure on your end.

At 60 days, you also need to start thinking about E&O exposure. Policies that lapse for non-payment because nobody caught the aging receivable in time are a documented source of E&O claims. I've seen it. It's an unpleasant conversation with a carrier.

The 90+ bucket is the autopsy

By the time something hits 90 days, you're mostly doing forensics. You're figuring out what went wrong, not preventing it.

That said, the 90+ bucket still tells you something useful: what percentage of it is commercial versus personal lines, and whether there are patterns by carrier or policy type. If 70% of your 90+ is commercial, the issue might be installment billing on large accounts where the carrier's own billing is creating confusion. If it's concentrated in personal lines, you may have a specific book of clients who need a different billing structure.

I don't know what a universal acceptable 90+ percentage looks like, and neither do most agency owners I've asked. It depends too much on book mix and average premium size. What I do know is that if 90+ is growing month over month for three consecutive months, the problem is structural, not situational.

Reading the shape, not just the numbers

Here's the frame I use. Draw a rough bar chart of the four buckets as percentages of total AR. A healthy agency looks like a steep decline from left to right, current being the tall bar and 90+ being nearly flat. A billing problem looks like a moderate current bucket with a fat 30-day bar. A follow-up problem looks like current and 30-day are both elevated. A client distress problem looks like the 60 and 90+ bars are growing while current stays flat.

These shapes don't require sophisticated software. You can see them in a basic report out of any AMS worth running. The problem is that most people look at the total dollar figure and stop there.

Pull this month's report, draw the four bars on a whiteboard, and decide which shape you're actually looking at before you assign blame or start calling clients.