The cash flow schedule includes the total time span beginning with the first stage of the operating cycle, when resources are purchased, to the last stage when receipts are collected.
It consists of 4 basic steps.
1. Material purchases.
The acquisition of raw materials or goods for resale includes negotiating the method of payment, credit terms and trade and payment discounts.
2. Payment of resources.
All resources necessary to support sales, including labor, marketing, and overhead, incur financing costs until cash is received for sales made.
3. Sale of inventory or services.
Sales of goods and the like are most often made by extending credit to customers. The accounts receivable collection schedule is a major objective in cash management.
4. Cashing Receipts.
Only when the customer has provided good funds for the merchandise or service does the cash cycle end for that transaction.