35 Days credit

Daisyduck1

Hi,

Please would somebody help me calculate payment dates for a customer who has credit terms of 35 days.


Many thanks

SandyHood

I answered this when you asked before.
[post=259455]this uses your example[/post]

This time I'll try to be generic
You would normally have to make a series of assumptions. The list of multiple choice alternatives mean you do not have to make assumptions as they limit your possible answers.

1. Find your monthly credit sales
2. divide the total credit sales by the number of days you think the business is using for selling (in the link I assumed every day of the month) this gives the average credit sales per day
3. Match the average sales per day with the days in the following month. In your example, I said that Sales on 1st May will be received on June 5th etc. (in other words 35 days later)
4. Add up all the days you will receive the sales from the previous month to find the total cash receipts from the previous month's sales.
5. June 30th is the last day you can receive cash in June, so sales in May on 26th are the last sales that are paid for in June
6. The Payment for sales on May 27th are received on July 1st etc
7. July receipts are then made up of: May 27th toMay 31st Sales, and June 1st to June 27th Sales

My value for cash receipts in July would be:
27th to 31st May average credit sales (i.e. 5 days x £77.42)
1st to 26th June average credit sales (i.e. 26 days x £90.00)
All the July cash sales (i.e. £12,000)

A total around £14,727.10 (I used excel for the £77.42 so don't worry if our answers don't agree)

The logic is sound, you can choose alternative assumptions, may be change the days may be treat Sundays as non trading days: that is up to you. You might even assume that the June credit sales are all received in July. What I hope this does is to answer the question you posed.