Projecting A/R collections is important for meeting requirements as they come due.

Being able to identify customers who won’t pay, is important for estimating uncollectible A/R. Your uncollectible A/R history and sales staff are good sources. For example, if history shows that 3%-5% of credit sales go bad, estimate 4% of A/R as uncollectible.

Figuring out when is the next step in A/R collection. Age your A/R: Start listing each customer with the related balance and organize into when you expect to receive payment from them: within 1-30 days, 31-60 days, and later than 60 days.

Identifing the percentage of customers who pay on time v. late, and how late. Say that 30% of customers typically pay in the month of their purchase, 50% the month after that, and 20% the following month. If you have $100,000 in A/R that is classified as collectible, you can forecast that $30,000 will be obtained this month, $50,000 the following month and $20,000 the month after that. Adding forecasted cash sales to each section and forecasted collections from other months.

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