Ahz move, page-22

Hi Kogarahboy,

The diff that you see between Revenue and Receipts is due to the fact that AHZ uses an "Accrual" method of accounting as opposed to a cash method of accounting.

Cash Accounting means The cash you take = your revenue. This is the method of accounting that say a coffee shop or cafe would use. (a sale and payment are usually at the same time)

Accrual accounting means you can book a sale (Revenue) and receive the cash later.
ie, we sell $500k worth of patches to a hospital with 30 day payment terms (they pay for them at the end of the following month).

The difference between Revenue and receipts is due the payment terms - the longer the payment terms the bigger the gap would be. For example, (assuming no carry in receipts) if we sold $7M worth of product in the Jan quarter and we told all of the customers that they could have 90 day payment terms, we would have $7M revenue, and $0.00 receipts in the Jan quarter. However, we'd collect all $7M in the March Quarter.

Per AHZ's annual report, standard terms are 30 days. Meaning that for any quarter, cash (receipts) from sales in the 1st 2 months would be collected in that quarter, but the payment for sales made in the last quarter would not be collected till the following quarter. (In practice though, the cash conversion rate is lower)

These uncollected receipts are referred to as "receivables" - which you'll find on the companies balance sheet. This means for any given quarter, we can expect to collect outstanding receivables from the previous quarter + a portion of the Revenue billed in the current quarter (from analysing the trends i've found the amount of cash collected in a quarter is between 40 - 45% of revenue booked in said quarter)

In the model i posted, there is also an adjustment in the receipts, because the receivables contains a chunk from a contract to a Townsville hospital (check notes to the financial statements in the annual report). I have assumed those receivables will be converted to receipts at approx $100,000 per quarter.

I hope this helps.
Regards

Musky.