Homebuyers Privacy Protection Act (HR 2808) – Introduced by Rep. John Rose (R-TN) on April 10, the House passed this bill on June 23, and the Senate passed it on Aug. 2. Signed into law on Sept. 5, this bipartisan bill prohibits a consumer reporting agency from selling a mortgage applicant’s personal information to other lenders without their explicit consent. The legislation is designed to safeguard homebuyers’ personal financial information and eliminate the frequent bombardment of other lender marketing offers during the financing process underway with the applicant’s existing lender.
SUPPORT for Patients and Communities Reauthorization Act of 2025 (HR 2483) – This bill renews billions of dollars in federal funding for programs responsible for preventing overdoses and further strengthening treatment and recovery services. The renewal of funds to nationwide county programs is timely, given the current behavioral health and substance abuse disorder crises. The bill was introduced by Rep. Brett Guthrie (R-KY) on March 31, passed in the House on June 4 and in the Senate on Sept. 18; it currently awaits signature by the president.
TRAVEL Act of 2025 (HR 3400) – Also known as the Territorial Response and Access to Veterans’ Essential Lifecare Act, the purpose of this bill is to enable VA physicians and specialists to travel to hard-to-reach areas in U.S. territories for up to one year. The Act is designed to help fill critical gaps in VA medical services across the Pacific territories by compensating providers with travel bonuses. The legislation was introduced by Representative Kimberlyn King-Hinds (R-Northern Mariana Islands) on May 14. It passed in the House on Sept. 15 and currently lies with the Senate.
Fire Ready Nation Act of 2025 (S 306) – Introduced by Sen. Maria Cantwell (D-WA) on Jan. 29, this legislation would establish a fire weather program at the National Oceanic and Atmospheric Administration (NOAA). The new program would enable scientists to better predict wildfires, fire weather, and fire risk via forecasting, detection, and modeling, as well as respond quickly to prevent devastation to families, homes, and businesses due to wildfires. The legislation was passed in the Senate on Sept. 10 and is now under review in the House.
Enhancing First Response Act (S 725) – This bill was introduced on Feb. 25 by Sen. Amy Klobuchar (D-MN) and passed in the Senate on Sept. 10. The law would reclassify 911 dispatchers as public safety workers from their current role as office and administrative support in the federal Standard Occupational Classification system. In addition, the bill contains provisions to improve access to the 911 call system during major disasters and make the system more resilient against outages and disruptions. The fate of this bipartisan bill now rests in the House.
National Manufacturing Advisory Council Act (S 433) – This Act was introduced by Sen. Gary Peters (D-MI) on Feb. 5. It seeks to establish a working group of representatives from industry, labor, and academia to advise Congress on policies and programs to enhance domestic manufacturing despite the challenges of global competition, U.S. supply chain issues, and the current tariff solution. The bipartisan legislationwas passed unanimously in the Senate on July 14 and is currently under review in the House.
Enhancing Homebuyer Protections, Wildfire Risks, 911 Response and Domestic Manufacturing
October 1, 2025 · Blog, Congress at Work, Uncategorized
⏱ 3 min read
Homebuyers Privacy Protection Act (HR 2808) – Introduced by Rep. John Rose (R-TN) on April 10, the House passed this bill on June 23, and the Senate passed it on Aug. 2. Signed into law on Sept. 5, this bipartisan bill prohibits a consumer reporting agency from selling a mortgage applicant’s personal information to other lenders without their explicit consent. The legislation is designed to safeguard homebuyers’ personal financial information and eliminate the frequent bombardment of other lender marketing offers during the financing process underway with the applicant’s existing lender.
SUPPORT for Patients and Communities Reauthorization Act of 2025 (HR 2483) – This bill renews billions of dollars in federal funding for programs responsible for preventing overdoses and further strengthening treatment and recovery services. The renewal of funds to nationwide county programs is timely, given the current behavioral health and substance abuse disorder crises. The bill was introduced by Rep. Brett Guthrie (R-KY) on March 31, passed in the House on June 4 and in the Senate on Sept. 18; it currently awaits signature by the president.
TRAVEL Act of 2025 (HR 3400) – Also known as the Territorial Response and Access to Veterans’ Essential Lifecare Act, the purpose of this bill is to enable VA physicians and specialists to travel to hard-to-reach areas in U.S. territories for up to one year. The Act is designed to help fill critical gaps in VA medical services across the Pacific territories by compensating providers with travel bonuses. The legislation was introduced by Representative Kimberlyn King-Hinds (R-Northern Mariana Islands) on May 14. It passed in the House on Sept. 15 and currently lies with the Senate.
Fire Ready Nation Act of 2025 (S 306) – Introduced by Sen. Maria Cantwell (D-WA) on Jan. 29, this legislation would establish a fire weather program at the National Oceanic and Atmospheric Administration (NOAA). The new program would enable scientists to better predict wildfires, fire weather, and fire risk via forecasting, detection, and modeling, as well as respond quickly to prevent devastation to families, homes, and businesses due to wildfires. The legislation was passed in the Senate on Sept. 10 and is now under review in the House.
Enhancing First Response Act (S 725) – This bill was introduced on Feb. 25 by Sen. Amy Klobuchar (D-MN) and passed in the Senate on Sept. 10. The law would reclassify 911 dispatchers as public safety workers from their current role as office and administrative support in the federal Standard Occupational Classification system. In addition, the bill contains provisions to improve access to the 911 call system during major disasters and make the system more resilient against outages and disruptions. The fate of this bipartisan bill now rests in the House.
National Manufacturing Advisory Council Act (S 433) – This Act was introduced by Sen. Gary Peters (D-MI) on Feb. 5. It seeks to establish a working group of representatives from industry, labor, and academia to advise Congress on policies and programs to enhance domestic manufacturing despite the challenges of global competition, U.S. supply chain issues, and the current tariff solution. The bipartisan legislationwas passed unanimously in the Senate on July 14 and is currently under review in the House.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Based on statistics from the World Bank, the United States government spent 3.59 percent of its 2022 gross domestic product on research and development. While private businesses spend on their own research and development costs, it’s important for businesses to treat these expenditures appropriately.
When it comes to research and development outlays, U.S. Generally Accepted Accounting Principles (GAAP) dictate that businesses must expense them during the identical fiscal year as they’re consumed. Accordingly, this creates difficulties for investors and business owners alike in two ways. The first is more uncertain profitability and loss projections. The second is a murkier ability to quantify their rates of return on assets and investments.
If R&D capitalization is minimal or non-existent by a company, it can imply the business’ total assets (or its total invested capital) doesn’t accurately represent how much has been put into such assets. This will affect the business’ Return on Assets (ROA) and Return on Invested Capital (ROIC). This illustrates the importance in differences of how businesses treat their R&D expenses – using the balance sheet to capitalize and the income statement to expense.
Accounting Standards
Per International Financial Reporting Standards (IFRS), research outlays are classified as expenses annually, like GAAP. However, development costs may be capitalized for businesses with assets under incubation for saleable purposes (in other words, the tech/IP is expected to be approved and produce revenue in the future).
One consideration with IFRS is that a portion of research and development costs may be capitalized or recorded as an asset on the business’ balance sheet, instead of classified as an expense on the Profit and Loss Statement. It’s important, though, to understand that judgment is in the eye of the classification as to how commercially viable a product or service will be in the future, potentially causing issues on the company’s financial statements. Since research and development is sporadic, it impacts a business’ profitability. It’s seen in certain sectors, such as consumer discretionary, healthcare, and technology, to highlight a few.
With revenue, cash flow, and profit expected from the long-term investment of research and development, for products or services with a realistic chance, it should be capitalized and not expensed. Investors need to be aware of the differences in how businesses capitalize or expense their research and development spending, since, without additional financial analysis, it’s important to factor in research and development equally. This is because companies that don’t capitalize experience more unstable earnings.
Exploring Capitalization Versus Expensing
To determine the value and to capitalize such assets, analysts must project the asset’s lifespan to produce benefits (over its economic life) and go with that projection for the amortization period.
Amortization life varies between assets and is based on the economic life of the particular asset. Ways to determine the economic life depend on both the asset’s patentability and/or salability. If there’s a pharmaceutical drug with a 20-year patent, it’ll likely have a much longer life than the next mobile device or graphic processing unit (GPU).
Assuming an asset has a life of six years, the business would amortize equally over the six-year time frame. There can be a multitude of amortization approaches, but the straight-line method is used for the capitalized research and development expenses. It assumes the following figures:
$200,000 spent on R&D
$40,000 residual value
Based on the difference of $160,000 and the six-year economic life, each year would result in approximately $26,666 in amortization expense. After six years, the resulting value would be $40,000 in residual value.
Conclusion
Understanding the importance of accounting for R&D outlays is helpful for businesses to maximize investments for competitiveness and financial compliance.
Capitalizing Versus Expensing Research and Development
September 1, 2025 · Accounting News, Blog, Uncategorized
⏱ 4 min read
Based on statistics from the World Bank, the United States government spent 3.59 percent of its 2022 gross domestic product on research and development. While private businesses spend on their own research and development costs, it’s important for businesses to treat these expenditures appropriately.
When it comes to research and development outlays, U.S. Generally Accepted Accounting Principles (GAAP) dictate that businesses must expense them during the identical fiscal year as they’re consumed. Accordingly, this creates difficulties for investors and business owners alike in two ways. The first is more uncertain profitability and loss projections. The second is a murkier ability to quantify their rates of return on assets and investments.
If R&D capitalization is minimal or non-existent by a company, it can imply the business’ total assets (or its total invested capital) doesn’t accurately represent how much has been put into such assets. This will affect the business’ Return on Assets (ROA) and Return on Invested Capital (ROIC). This illustrates the importance in differences of how businesses treat their R&D expenses – using the balance sheet to capitalize and the income statement to expense.
Accounting Standards
Per International Financial Reporting Standards (IFRS), research outlays are classified as expenses annually, like GAAP. However, development costs may be capitalized for businesses with assets under incubation for saleable purposes (in other words, the tech/IP is expected to be approved and produce revenue in the future).
One consideration with IFRS is that a portion of research and development costs may be capitalized or recorded as an asset on the business’ balance sheet, instead of classified as an expense on the Profit and Loss Statement. It’s important, though, to understand that judgment is in the eye of the classification as to how commercially viable a product or service will be in the future, potentially causing issues on the company’s financial statements. Since research and development is sporadic, it impacts a business’ profitability. It’s seen in certain sectors, such as consumer discretionary, healthcare, and technology, to highlight a few.
With revenue, cash flow, and profit expected from the long-term investment of research and development, for products or services with a realistic chance, it should be capitalized and not expensed. Investors need to be aware of the differences in how businesses capitalize or expense their research and development spending, since, without additional financial analysis, it’s important to factor in research and development equally. This is because companies that don’t capitalize experience more unstable earnings.
Exploring Capitalization Versus Expensing
To determine the value and to capitalize such assets, analysts must project the asset’s lifespan to produce benefits (over its economic life) and go with that projection for the amortization period.
Amortization life varies between assets and is based on the economic life of the particular asset. Ways to determine the economic life depend on both the asset’s patentability and/or salability. If there’s a pharmaceutical drug with a 20-year patent, it’ll likely have a much longer life than the next mobile device or graphic processing unit (GPU).
Assuming an asset has a life of six years, the business would amortize equally over the six-year time frame. There can be a multitude of amortization approaches, but the straight-line method is used for the capitalized research and development expenses. It assumes the following figures:
$200,000 spent on R&D
$40,000 residual value
Based on the difference of $160,000 and the six-year economic life, each year would result in approximately $26,666 in amortization expense. After six years, the resulting value would be $40,000 in residual value.
Conclusion
Understanding the importance of accounting for R&D outlays is helpful for businesses to maximize investments for competitiveness and financial compliance.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Required minimum distributions (RMDs) from traditional IRAs and 401(k)s often become a significant tax burden during retirement. As the percentage of your IRA that must be distributed increases each year, many retirees face higher adjusted gross income and increased exposure to stealth taxes. However, with strategic planning, you can transform RMDs from burdens into opportunities.
Timing Your First RMD
The RMD starting age has changed recently: age 72 for those born before 1951, age 73 for those born 1951-1959, and age 75 for those born in 1960 or later. Your first RMD must be taken by April 1 of the year following when you reach the required age.
While you can delay your first RMD until early the following year, most taxpayers should take it in the year they reach the required age. Delaying means you’ll take two RMDs in one calendar year – your delayed first RMD plus that year’s current RMD – potentially pushing you into higher tax brackets and increasing stealth taxes.
Managing Multiple IRAs
If you own several traditional IRAs, you have valuable flexibility under the aggregation rules. First, calculate the RMD for each IRA separately. Then, you can either take distributions from each IRA individually or combine all RMDs and withdraw the total amount from your IRAs in any ratio you choose, even taking the entire amount from just one account.
This flexibility allows you to rebalance your portfolio, draw down smaller accounts, or meet other financial goals. Just ensure that by December 31, your total distributions equal or exceed the aggregate RMD. Note that inherited IRAs and employer plans like 401(k)s cannot be aggregated and must have their RMDs calculated and taken separately.
Charitable Giving Strategy
One of the most tax-efficient strategies is using qualified charitable distributions (QCDs). If you’re over 70½ and make charitable gifts, taking your RMD as a QCD can reduce your taxable income while satisfying the distribution requirement. This strategy often provides better tax benefits than taking a distribution and then making a separate charitable deduction.
Account Structure Optimization
The tax law allows you to consolidate or split IRAs without tax consequences using direct trustee-to-trustee transfers. Some people prefer multiple IRAs for beneficiary planning, different investment strategies or to keep 401(k) rollover money separate. Others find multiple accounts harder to manage and worry about unequal performance affecting beneficiaries differently.
Consider your specific situation: if you have a qualified longevity annuity contract (QLAC) that delays RMDs until age 85, managing it in a separate IRA might be easier.
In-Kind Distributions
You don’t need to sell assets to generate cash for RMDs. Instead, you can make in-kind distributions by transferring securities directly from your IRA to a taxable account. This preserves your asset allocation and can be particularly advantageous when assets have temporarily declined in value.
With in-kind distributions, the asset’s value on the distribution date becomes your new tax basis. If you believe a depressed asset will recover, distributing it allows the ordinary income tax on the current low value while future appreciation becomes tax-advantaged long-term capital gains. This strategy is also helpful for unconventional assets like real estate or small business interests that are difficult to sell in portions.
Distribution Timing and Amount
You can take RMDs anytime during the year. Some prefer monthly distributions for regular cash flow, others take distributions early to ensure compliance, and some wait until year-end to maximize tax deferral and delay estimated tax payments.
Remember that RMDs are minimums – you can always take more. Consider larger distributions in years when your tax rate is unusually low due to higher deductions or lower income. This reduces future RMDs when your tax rate might be higher.
Conclusion
Strategic RMD planning can significantly reduce their tax impact. By understanding timing options, leveraging aggregation rules, using charitable strategies, optimizing account structures, considering in-kind distributions and timing distributions strategically, you can turn required distributions into opportunities for smart tax and retirement planning.
How to Reduce the Burden of IRA Required Minimum Distributions
September 1, 2025 · Blog, Tax and Financial News, Uncategorized
⏱ 4 min read
Required minimum distributions (RMDs) from traditional IRAs and 401(k)s often become a significant tax burden during retirement. As the percentage of your IRA that must be distributed increases each year, many retirees face higher adjusted gross income and increased exposure to stealth taxes. However, with strategic planning, you can transform RMDs from burdens into opportunities.
Timing Your First RMD
The RMD starting age has changed recently: age 72 for those born before 1951, age 73 for those born 1951-1959, and age 75 for those born in 1960 or later. Your first RMD must be taken by April 1 of the year following when you reach the required age.
While you can delay your first RMD until early the following year, most taxpayers should take it in the year they reach the required age. Delaying means you’ll take two RMDs in one calendar year – your delayed first RMD plus that year’s current RMD – potentially pushing you into higher tax brackets and increasing stealth taxes.
Managing Multiple IRAs
If you own several traditional IRAs, you have valuable flexibility under the aggregation rules. First, calculate the RMD for each IRA separately. Then, you can either take distributions from each IRA individually or combine all RMDs and withdraw the total amount from your IRAs in any ratio you choose, even taking the entire amount from just one account.
This flexibility allows you to rebalance your portfolio, draw down smaller accounts, or meet other financial goals. Just ensure that by December 31, your total distributions equal or exceed the aggregate RMD. Note that inherited IRAs and employer plans like 401(k)s cannot be aggregated and must have their RMDs calculated and taken separately.
Charitable Giving Strategy
One of the most tax-efficient strategies is using qualified charitable distributions (QCDs). If you’re over 70½ and make charitable gifts, taking your RMD as a QCD can reduce your taxable income while satisfying the distribution requirement. This strategy often provides better tax benefits than taking a distribution and then making a separate charitable deduction.
Account Structure Optimization
The tax law allows you to consolidate or split IRAs without tax consequences using direct trustee-to-trustee transfers. Some people prefer multiple IRAs for beneficiary planning, different investment strategies or to keep 401(k) rollover money separate. Others find multiple accounts harder to manage and worry about unequal performance affecting beneficiaries differently.
Consider your specific situation: if you have a qualified longevity annuity contract (QLAC) that delays RMDs until age 85, managing it in a separate IRA might be easier.
In-Kind Distributions
You don’t need to sell assets to generate cash for RMDs. Instead, you can make in-kind distributions by transferring securities directly from your IRA to a taxable account. This preserves your asset allocation and can be particularly advantageous when assets have temporarily declined in value.
With in-kind distributions, the asset’s value on the distribution date becomes your new tax basis. If you believe a depressed asset will recover, distributing it allows the ordinary income tax on the current low value while future appreciation becomes tax-advantaged long-term capital gains. This strategy is also helpful for unconventional assets like real estate or small business interests that are difficult to sell in portions.
Distribution Timing and Amount
You can take RMDs anytime during the year. Some prefer monthly distributions for regular cash flow, others take distributions early to ensure compliance, and some wait until year-end to maximize tax deferral and delay estimated tax payments.
Remember that RMDs are minimums – you can always take more. Consider larger distributions in years when your tax rate is unusually low due to higher deductions or lower income. This reduces future RMDs when your tax rate might be higher.
Conclusion
Strategic RMD planning can significantly reduce their tax impact. By understanding timing options, leveraging aggregation rules, using charitable strategies, optimizing account structures, considering in-kind distributions and timing distributions strategically, you can turn required distributions into opportunities for smart tax and retirement planning.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Life insurance is something most of us don’t want to talk about. But the truth is, no one gets out of life alive. So, it might make sense to face it now so that when you really need it, it’s there. Before you start looking for a life insurance policy, let’s dispel some of the untruths you might have heard.
Myth #1: It’s too expensive. According to a recent survey by Life Insurance Marketing and Research Association (LIMRA), 52 percent of people thought it was too expensive to have or get more of. And how did they come to this conclusion? They based this on their “gut instinct,” or a “wild guess.” Truth is, it’s more affordable than you think and varies from person to person. In fact, the estimated yearly cost of a $500,000, 30-year term insurance policy for a healthy 30-year-old, non-smoking female is $316.
Myth #2: It’s a pain to apply. Not true. Thanks to the pandemic, which caused us to eliminate or reduce human interactions (like getting a doctor’s exam for term policies), you can apply online. These days, all you have to do is answer a few questions on your phone. Easy peasy.
Myth #3: My company’s policy is enough. Maybe. The coverage you have might not be enough for your family. Here are some facts. The median workplace life insurance coverage is either just a flat sum of $20,000 or one year’s salary.Of U.S. households that rely on workplace life insurance coverage, 44 percent say their families would struggle financially in less than six months should a wage earner die unexpectedly. So, what to do? A simple guideline is this: Aim for 10 to 12 times your annual salary and bonus, but people who are younger (farther away from retirement) might need more. Folks closer to retirement might need less.
Myth #4: I only need coverage if I’m working. If you’re not employed outside the home – like if you’re a stay-at-home mom – it’s still important to consider life insurance. Typically, life insurance is considered a replacement for lost income. If something happens to the non-breadwinner, it could also be necessary to pay for childcare and household work in your absence. The most important thing is to plan your coverage together with your family in mind so that you’re both in the best position possible should one of you pass away.
Myth #5: I don’t need life insurance until I’m older or become a parent. Nope. In fact, not only do you not have to be a parent, but your beneficiary could also be your partner or anyone else who relies on you. And you can change your beneficiaries (you can have more than one), should things change. Plus, if you apply for life insurance earlier in life, you’ll save money on premiums. Why? Because one thing that factors into how much you pay – or qualify for coverage at all – is your health. As you get older, your risk for developing health issues increases. According to LIMRA, 40 percent of those who have policies wish they’d bought them when they were younger.
In the end, you’ll want to take care of those who depend on you – and those you love. That’s why knowing the truth about life insurance matters.
September 1, 2025 · Blog, Tip of the Month, Uncategorized
⏱ 3 min read
Life insurance is something most of us don’t want to talk about. But the truth is, no one gets out of life alive. So, it might make sense to face it now so that when you really need it, it’s there. Before you start looking for a life insurance policy, let’s dispel some of the untruths you might have heard.
Myth #1: It’s too expensive. According to a recent survey by Life Insurance Marketing and Research Association (LIMRA), 52 percent of people thought it was too expensive to have or get more of. And how did they come to this conclusion? They based this on their “gut instinct,” or a “wild guess.” Truth is, it’s more affordable than you think and varies from person to person. In fact, the estimated yearly cost of a $500,000, 30-year term insurance policy for a healthy 30-year-old, non-smoking female is $316.
Myth #2: It’s a pain to apply. Not true. Thanks to the pandemic, which caused us to eliminate or reduce human interactions (like getting a doctor’s exam for term policies), you can apply online. These days, all you have to do is answer a few questions on your phone. Easy peasy.
Myth #3: My company’s policy is enough. Maybe. The coverage you have might not be enough for your family. Here are some facts. The median workplace life insurance coverage is either just a flat sum of $20,000 or one year’s salary.Of U.S. households that rely on workplace life insurance coverage, 44 percent say their families would struggle financially in less than six months should a wage earner die unexpectedly. So, what to do? A simple guideline is this: Aim for 10 to 12 times your annual salary and bonus, but people who are younger (farther away from retirement) might need more. Folks closer to retirement might need less.
Myth #4: I only need coverage if I’m working. If you’re not employed outside the home – like if you’re a stay-at-home mom – it’s still important to consider life insurance. Typically, life insurance is considered a replacement for lost income. If something happens to the non-breadwinner, it could also be necessary to pay for childcare and household work in your absence. The most important thing is to plan your coverage together with your family in mind so that you’re both in the best position possible should one of you pass away.
Myth #5: I don’t need life insurance until I’m older or become a parent. Nope. In fact, not only do you not have to be a parent, but your beneficiary could also be your partner or anyone else who relies on you. And you can change your beneficiaries (you can have more than one), should things change. Plus, if you apply for life insurance earlier in life, you’ll save money on premiums. Why? Because one thing that factors into how much you pay – or qualify for coverage at all – is your health. As you get older, your risk for developing health issues increases. According to LIMRA, 40 percent of those who have policies wish they’d bought them when they were younger.
In the end, you’ll want to take care of those who depend on you – and those you love. That’s why knowing the truth about life insurance matters.
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
According to the Federal Reserve Bank of St. Louis, collection agencies saw $16.28 billion in revenue in 2019. While revenues have declined somewhat in recent years, unpaid invoices are still big business. Accounts receivable aging reports can help companies identify and mitigate unpaid invoices and potentially lower a business’ need to send unpaid invoices to collection agencies.
An accounts receivable aging report analyzes how well a company manages its accounts receivables (AR) and identifies the level of any abnormalities. It looks at receivables based on their age; specifically, the time the invoice has been unpaid and outstanding. Then, once receivables have been analyzed for non-payment based on different time frames, the business can determine whether to follow up with the customer, send it to collections, or write the invoice off.
Whether it’s created manually through a spreadsheet or done in conjunction with accounting or billing software, either way the AR aging report takes data from the company’s accounts receivable ledger. The following is a general overview of how to create this report:
Step 1: Aggregate invoices and determine if any credit memos or outstanding adjustments on outstanding invoices need to be addressed first.
Step 2: Create time frames for the invoices, be it buckets such as: 1. 0-30 days. 2. 31-60 days. 3. 60+ days. These can be referred to as “aging buckets” to categorize the invoices.
Step 3: Ensure fields for customer information, invoice details, invoice amounts, notes, etc., are ready for the information to flow into.
Step 4: Calculate unpaid invoice balances and group them by customer and time frame.
While this is only an example and can be modified based upon the company’s needs, it’s a starting point for further analysis. From there, along with updating the report on a monthly, quarterly or annual basis, the company can identify how to improve its cash position by determining its weak points.
One important consideration, especially for businesses with high levels of old, uncollected receivables, is that the company’s collection practices can be re-evaluated more effectively. The analysis can show that some customers take too long, and the company needs to be more proactive in following up with them sooner. It can also convey the need to incentivize their collections with early payment discounts.
This data also enables a company to identify customers who have outstanding payments and assess the associated risk to the company’s credit rating. Especially for publicly traded companies, and even for private equity investment evaluations, investors can see how competitive or not their credit rating is compared to similar companies in the same industry. When analyzing customers, it may be necessary to tighten terms or simply stop doing business with the customer.
Companies can offer pre- or early payment terms, with discounts available to customers who pay their invoices upon receipt or within a certain time frame. During challenging conditions for a particular sector or for the economy overall, businesses can set up payment plans to maintain positive relations with certain customers.
While there’s no perfect accounts receivable aging report, an effective one will organize, identify, and reduce the likelihood of increasing numbers of unpaid invoices.
September 1, 2025 · Blog, General Business News, Uncategorized
⏱ 3 min read
According to the Federal Reserve Bank of St. Louis, collection agencies saw $16.28 billion in revenue in 2019. While revenues have declined somewhat in recent years, unpaid invoices are still big business. Accounts receivable aging reports can help companies identify and mitigate unpaid invoices and potentially lower a business’ need to send unpaid invoices to collection agencies.
An accounts receivable aging report analyzes how well a company manages its accounts receivables (AR) and identifies the level of any abnormalities. It looks at receivables based on their age; specifically, the time the invoice has been unpaid and outstanding. Then, once receivables have been analyzed for non-payment based on different time frames, the business can determine whether to follow up with the customer, send it to collections, or write the invoice off.
Whether it’s created manually through a spreadsheet or done in conjunction with accounting or billing software, either way the AR aging report takes data from the company’s accounts receivable ledger. The following is a general overview of how to create this report:
Step 1: Aggregate invoices and determine if any credit memos or outstanding adjustments on outstanding invoices need to be addressed first.
Step 2: Create time frames for the invoices, be it buckets such as: 1. 0-30 days. 2. 31-60 days. 3. 60+ days. These can be referred to as “aging buckets” to categorize the invoices.
Step 3: Ensure fields for customer information, invoice details, invoice amounts, notes, etc., are ready for the information to flow into.
Step 4: Calculate unpaid invoice balances and group them by customer and time frame.
While this is only an example and can be modified based upon the company’s needs, it’s a starting point for further analysis. From there, along with updating the report on a monthly, quarterly or annual basis, the company can identify how to improve its cash position by determining its weak points.
One important consideration, especially for businesses with high levels of old, uncollected receivables, is that the company’s collection practices can be re-evaluated more effectively. The analysis can show that some customers take too long, and the company needs to be more proactive in following up with them sooner. It can also convey the need to incentivize their collections with early payment discounts.
This data also enables a company to identify customers who have outstanding payments and assess the associated risk to the company’s credit rating. Especially for publicly traded companies, and even for private equity investment evaluations, investors can see how competitive or not their credit rating is compared to similar companies in the same industry. When analyzing customers, it may be necessary to tighten terms or simply stop doing business with the customer.
Companies can offer pre- or early payment terms, with discounts available to customers who pay their invoices upon receipt or within a certain time frame. During challenging conditions for a particular sector or for the economy overall, businesses can set up payment plans to maintain positive relations with certain customers.
While there’s no perfect accounts receivable aging report, an effective one will organize, identify, and reduce the likelihood of increasing numbers of unpaid invoices.
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According to the Federal Reserve Bank of St. Louis, collection agencies saw $16.28 billion in revenue in 2019. While revenues have declined somewhat in recent years, unpaid invoices are still big business. Accounts receivable aging reports can help companies identify and mitigate unpaid invoices and potentially lower a business’ need to send unpaid invoices to collection agencies.