How to Calculate Estimated Cash Receipts

Cash receipts come from the sale of goods and services. Two types of cash receipts are common in accounting terms. First, cash receipts come from cash received at the time of sale. Second, cash receipts come in when collected from goods sold on account, known as accounts receivable in accounting terminology. Estimating cash receipts is often a focus for the collection of accounts receivable. The process involves the use of an accounts receivable aging report, which lists all open accounts owing the company money.

Instructions

1. Prepare a current accounts receivable aging report. List all open accounts by age, using 30, 60, 90 and 120 days as the column headers. All unpaid accounts go on this report under the corresponding header.

2. Determine the amounts collected from open accounts based on the aging report. For example, note how much money collected from 30-day accounts, 60-day accounts and 90-day accounts.

3. Divide the amounts collected by the total accounts receivable outstanding for each column. A company that collects $10,000 from a total $25,000 30-day accounts outstanding has a 40 percent collection rate.

4. Complete the Step 3 process for all columns on the accounts receivable aging report.

5. Apply the computed collection percentages to future credit sales. This allows a company to determine how much money they will collect each month to pay for operations.

References

• "Accounting"; Charles T. Horngren, et al.; 2007