Analysis of Ageing Schedule, Estimated Receipts and Payments, and Cash Budget for a Company

This article provides an analysis of the ageing schedule, estimated receipts and payments, and cash budget for a company. It highlights the importance of these schedules in managing working capital and identifies areas causing cash deficit. The article suggests ways to improve cash flow and manage working capital effectively.

Problem 1
Ageing Schedule
Aging Category (Percentages) June July August
0 – 30 days 74.6% 71.9% 68.0%
31 – 60 days 18.7% 20.5% 23.2%
61 – 90 days 3.7% 4.1% 4.2%
Over 90 days 3.0% 3.4% 4.6%
Total 100.0% 100.0% 100.0%
The ageing schedule shows the collection status of accounts receivable over the time frame. It is
an important schedule which helps in management of working capital requirement. As per above
table, it is evident that the companies accounts receivable of almost 70% to 74% are collected
within 30 days of the sales, similarly 20% are collected from 31 to 60 days and remaining are
collected after 60 days. (Fontinelle, 2018)
The above table shows a negative trend of accounts receivables meaning thereby the company is
unable to collect the accounts receivable on time and the collections are getting deferred, for
example, in June the company has collected 74.6% in June which has gone done to 68% in
august.
It is a serious concern for the management as it leads to mis-management of working capital. To
improve the situation, the management should emphasize on collection of accounts receivable in
the shortest span of time as possible. It can be done via giving discounts to customers on prompt
payments.

Problem 2
1. Statement of Estimated Receipts of Accounts Receivable
Payment Pattern 1 Month 2 Months 3 Months
Receipts % 75% 15% 5%
Discount % 2%
Net Receipts % 73% 15% 5%
Credit Sales Timing of Cash Inflow
March April May
December 8,000 400 - -
January 9,000 1,350 450 -
February 11,000 8,030 1,650 550
March 12,000 - 8,760 1,800
April 12,500 - - 9,125
May 12,300 - - -
Totals 64,800 9,780 10,860 11,475
2. Statement of Estimated Payment of Accounts Payable
Payment Pattern 1 Month 2 Months 3 Months
Receipts % 85.0% 15.0%
Discount % 1.7%
Net Receipts % 83.3% 15.0%
Credit Purchases Timing of Cash Outflow
March April May
January 23,000 3,450 - -
February 25,000 20,825 3,750 -
March 22,000 - 18,326 3,300
April 23,500 - - 19,576
May 24,500 - - -
Totals 118,000 24,275 22,076 22,876

3. Cash Budget
Particulars March April May Total
Cash receipts
- Cash sales 77,800 68,500 72,000 218,300
- Collected from accounts
receivable 9,780 10,860 11,475 32,115
Total cash receipts 87,580 79,360 83,475 250,415
Cash payments
- Cash purchases 12,000 12,000 13,000 37,000
- Payment to accounts payable 24,275 22,076 22,876 69,227
- Wages 20,000 17,500 20,000 57,500
- Other expenses 28,000 22,000 23,000 73,000
- Purchase of equipment - 16,750 - 16,750
- Purchase of furniture - - 15,000 15,000
Total cash payments 84,275 90,326 93,876 268,477
Increase in cash 3,305 (10,966) (10,401) (18,062)
Opening balance 18,000 21,305 10,339 (62)
Closing balance 21,305 10,339 (62) (18,123)
4. Cash budget is prepared to enable the company to forecast its coming cash inflows and cash
outflows. Thus, it helps in cash management and helps the company to identify the upcoming
working capital requirement. So, the management can forecast the probable working capital
requirement and can arrange for the funds in advance. (Staff, 2018)
Cash deficit arises when the company’s cash inflows are insufficient to meet its cash outflows. If
a business is cash deficit then it may have various negative impacts on the business. Cash
crunches leads to unnecessary cut down of important costs of the business, which negatively
impact the business.
In cash of budgeted cash deficit, the business should look out for the areas causing cash deficit, it
can be poor sales, purchases at higher costs, delayed collection from accounts receivable or non-
collection from accounts receivable. After identifying the areas, the management should take
serious actions to improve the cash flow.

References:
Fontinelle, A. (2018). Aging Schedule. [online] Investopedia. Available at:
https://www.investopedia.com/terms/a/aging-schedule.asp [Accessed 23 Oct. 2018].
Staff, I. (2018). Cash Budget. [online] Investopedia. Available at:
https://www.investopedia.com/terms/c/cashbudget.asp [Accessed 23 Oct. 2018].