How to Prepare a Schedule of Expected Cash Collections

by Kirk Thomason; Updated September 26, 2017

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.

Step 1

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.

Step 2

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

Step 3

Total all credit sales for the current accounting period.

Step 4

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

Step 5

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

Step 6

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

References

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

About the Author

Kirk Thomason began writing in 2011. In addition to years of corporate accounting experience, he teaches online accounting courses for two universities. Thomason holds a Bachelor and Master of Science in accounting.