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For creditors-to make payment, long due creditors will be given payment first.Mostly a company gets credit30 days or60 days or90 days. So by vendor ageing analysis the company can know to which all vendors payment due.
For Debtors-For same logic as explained as above but opposite. Here company prepares debtor ageing to know from which all cos payment is due. Also it forms the basis for creating provision for bad debts.
Yes some benefits is as you told. BUT what about the next important financial report to be used later using the Aging Report . Still not answered.
1-Aging reports for both A/R adn A/P are mainly used to help plan out payments and receipts.
2-To plan legal actions if required
3-To make imporvements in cash budget
4-To analyse credit policy of the company, and to make changes on credit terms in case needed
5-To put controls for the users (accountants or sales people) whatever the case may be so that the credit terms if reached no more sales are being processed, and likewise or payments when vendors reach a specific limit system must altert the users. These contols may be in software ERP or manual like in excel.
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