Accounting Dictionary

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Distribution Method

Definition: Under the distribution method, a cash forecaster examines historical cash flows to create an estimate of the timing and amounts of future cash flows.

The distribution method is useful for aggregating smaller cash inflows and outflows for which individual forecasting would be onerous.

The distribution method is frequently used in combination with the receipts and disbursements method, which employs more precise tracking of actual or estimated accounts payable and receivable to derive a cash forecast.