12.2 Cash Budgeting and the Sales Forecast
We start the process of building a cash budget with a prediction of the cash inflow from future sales, or the sales forecast. Remember that the act of the sale and the cash inflow from the sale often happen at different times. So we have two timing issues in sales forecasting:
When will the sale occur?
When will the firm receive the money for the sale?
In sales forecasting, the time when a company records a sale is often different from the time when it actually receives cash because of credit arrangements. The collection or accounts receivable cycle deals with the timing of credit sales.
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