How to Prepare a Schedule of Expected Cash Collections

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Cash collections help a company pay for its normal operations. Sales revenue is the starting point of cash collections. Companies will sell goods or services in exchange for cash and/or credit. Credit sales result in accounts receivable; this indicates a company has customers who owe it money. A company must spend time collecting these open accounts in order to receive the cash owed to it. A schedule of cash collections helps accountants determine how much cash a company can expect to collect during an accounting period.

Review the previous annual credit sales and accounts receivable to determine the potential bad debts. Bad debts represent unpaid accounts receivable the company will not collect.

Divide cash collected from credit sales by total credit sales. This provides an average collection percentage for open accounts receivable.

Total all credit sales for the current accounting period.

Multiply the figure from Step 3 by the collection percentage from Step 2. List the computed figure on the cash collection report.

Add total cash sales to the figure from Step 4. This represents the total cash collected for an accounting period.

Complete Steps 3 through 5 for each accounting period in the year. This will provide a total cash collection schedule for the entire year.

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References

  • "Intermediate Accounting"; J. David Spiceland, et al.; 2007
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