Forecasting Account Receivable Cash Flows

Overview

Accounts receivable represent credit that has been extended to a company's clients. They are assets of the company that will be converted into cash assuming that the client does not default. (see credit risk)

Forecasting

In order to forecast cash flows from accounts receivable, we need to be able to forecast which accounts will pay off and on which date, and also we need to be able to forecast new accounts receivable (typically from a forecast of sales)

• New Accounts Receivable - depending on the granularity of the forecast, one may wish to assume that a portion of forecasted sales is tied up in accounts receivable.
• Current Account Receivable Cash Flows