Managing Cash Flow

Cash Flow Planning 269
ACTUAL
PROJECTED
OCT NOV DEC JAN FEB MAR APR MAY JUN
Sales (actual for
first three months;
then forecasted) 196 207 203 200 250 400 500 300 200
Collections:
Cash sales—5% Actual Actual Actual 10 12 20 25 15 10
Current month
at 10% Actual Actual Actual 20 25 40 50 30 20
Prior month
at 60% Actual Actual Actual 122 120 150 240 300 180
Second prior
month at 15% Actual Actual Actual 31 30 30 37 60 75
Third prior
month at 10% Actual Actual Actual ___ 20 ___ 21 ___ 20 ____ 20 ____ 25 ____ 40
Total Cash Inflow
from Collections
Actual Actual Actual 203 208 260 372 430 325
Other cash
receipts Actual Actual Actual ___ 11 ___ 2 ___ 4 ____ 8 ____ 10 ____ 5
Total Cash
Inflow—Month Actual Actual Actual 214 ___ 210 ___ 264 ___ ____ 380 ____ 440 ____ 330
Total Cash
Inflow—Cum. 214 ___
424 ___
688 ___
1,068 ____
1,508 ____
1,838
____
Exhibit 8.1 Projected Cash Receipts ($$ in 000s)
sales, and the collection pattern determines the model to use in its own cash
receipts projections.
For simplicity of presentation the following exhibits use a six-month forecasting
period rather than a more typical 12-month period. Furthermore, the individual
schedules are shown separately for ease of understanding. In reality, the
entire cash budget will likely be a single document that encompasses all of the elements
shown in these exhibits.
Knowing its historical collection patterns, in total and by individual customer,
also enables the company to make decisions about differential pricing.
Better pricing for timely paying customers rewards them for their good efforts
and brings cash into the company more quickly. Higher prices for slow paying
customers creates an incentive for them to pay more quickly and helps the company
to recover its costs for not having the cash. This allows the company to effec-