Prepare Your Cash Collections Budget with LaChut Corporation
How can you create a cash collections budget for LaChut Corporation for the first quarter?
What is the collection pattern for credit sales? What are the sales projections for January, February, and March?
Cash Collections Budget for LaChut Corporation
To create a cash collections budget for LaChut Corporation for the first quarter, you need to understand the collection pattern for credit sales. The company has found that 60% of its sales are credit sales, with the remainder being cash sales. The collection pattern for credit sales is as follows:
- 25% received in the month of the sale
- 50% received in the month after the sale
- 14% received two months after the sale
- 11% of credit sales are never received
The sales projections for January, February, and March are as follows:
- January Sales: $145,000
- February Sales: $125,000
- March Sales: $165,000
Creating the Cash Collections Budget
To prepare a cash collections budget for LaChut Corporation for the first quarter, you can follow these steps:
- Calculate the cash sales and credit sales for each month based on the sales projections.
- Apply the collection pattern to determine the amount collected for credit sales in each month.
- Sum up the cash collections and credit collections for each month to get the total cash collections.
- Repeat the process for January, February, and March to create a comprehensive cash collections budget for the first quarter.
By tracking the amount of cash and credit sales in each month and calculating the monthly collections based on the collection pattern, you can prepare an effective cash collections budget for LaChut Corporation. This budget will help the company estimate its monthly cash inflow from sales, enabling better financial planning and budgeting decisions.