The paper 'Cash Collection Schedule Analysis - Chicago Electronics Pty Ltd" is an outstanding example of a finance and accounting case study. This report is prepared for the company’ s chief finance officer. The report is aimed at explaining to the chief finance officer the amount of money that the company can expect to collect for the period between March and August 2015 given its current cash collection policy. The company’ s current cash collection policy is such that the company makes all sales in credit with 30% of the sales expected to be collected within the month the sale is made.
40% of the sales revenue is collected within one month after the sale while 20% of the sales revenue is collected two months after the sale has been made. It should, however, be noted that 10% of the sales revenue will remain uncollectible and hence this is treated as bad debts. Thus, this report is aimed at breaking down how the company can expect to collect its ash receivables given the above receivables collection policy. In this regard, it is expected that the chief finance officer will always be able to know how much cash the company can expect to have at any given month and hence be able to better plan for its usage.
As such, this report will break down cash collection expectations for the six months period including the number of bad debts for each month, the cash collected and the amount of cash expected to be collected later in September and October. It should also be noted that some of the cash collection in the report refers to the sales made in January and February 2015 as shown in working 1 on the attached excel file.
This report will also aim at explaining to the chief finance officer the importance of the company having such a cash collection schedule analysis with respect to aiding the company in prudent financial management. Report overview In the cash collection schedule analysis in the excel file attached, it is established that the company will be able to collect the following amounts of money from March to October using the cash collection policy explained above. Month Expected collection March $23,100 April $24,000 May $23,000 June $23,000 July $26,500 August $30,800 Total collection for the period $150,400 Note that the above cash collection are based on the company’ s cash collection experience and hence policy and on the number of sales that the company made in January and February as well as its sales expectations for the period between March and August. Based on the same cash collection policy, the following amounts will remain uncollected at the end of the period.
Note that these amounts relate to both bad debts and the amounts expected to be collected in September and October with respect to the July and August sales. Month Cash expected to remain uncollected March $2,500 April $3,000 May $2,000 June $3,000 July $10,500 August $25,200 Totals $46,200 As such, of the sales expected to be made during the six months from March through August, $46,200 will still be uncollected at the end of August.
Of this, $28,600 is expected to be collected later. This relates to 20% ($7,000) of July sales that are expected to be collected in September. It also relates to 40% ($14,400) of August sales expected to be collected in the month of September and 20% ($7,200) sales of August sales that are expected to be collected in October.
It is worth noting that the rest of the money amounting to $17,600 refers to bad debts and hence it will remain uncollectible.