- Decide how much of
your business will be
for cash or thirty-day
terms, and how
much will be carried
for longer terms.
For example
If, your business has been 10% cash/30 days and
90% longer credit terms it likely will remain the
same if you don't plan to make changes to your
credit policies.
If, however, this is obviously putting a strain on the
business and you don't wish to increase your
operating loan, you may well want to review
your credit policies.
You have to decide whether the cost of carrying the(^) additional business on account is worth it.
- Now, you do the
same exercise for
your expenses and
prepare a
spreadsheet if your
business involves the
purchase and resale
of products.
(See example
below–Projected
Accounts Payable)
For example
First, estimate the purchases you plan to make each
month and enter the figures.
Then estimate the payments normally made on
purchases made on the current month's
purchases, the payments normally made on the
previous month's purchases, the payments
normally made on 60-day purchases and, finally,
the payments usually made on purchases over 60
days.
Total the Accounts Payable and enter this on the
spreadsheet.