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CBP'S CTP 2017 > Chapter 12 > Flashcards

Chapter 12 Flashcards

1
Q

Reverse positive pay

A
  • bank transmits a file of the cks presented for payment (daily/intraday basis)
  • within a specified time, company reviews and approves cks bank may process
  • does not apply to ACH– only paper cks

“pay none” or “pay all” terms: pay/reject all cks not approved in time

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2
Q

formula: average daily float

A

= total “dollar-days” of float in a given period of time / # of days in the period

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3
Q

formula: annual cost of float

A

(aka “is the opportunity cost of funds”)

= average daily float x opportunity cost of funds %

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4
Q

documentary collection (info disclosed)

A

info disclosed:

  • info regarding collecting bank– not remitting bank
  • date, tenor and value of the collection
  • details of bank and other charges to be paid by the exporter, importer, or both
  • recourse procedure in the event of a nonacceptance or nonpayment
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5
Q

retail lockbox

A
  • typically C2B
  • HIGH VOLUME
  • easy remittance (machine-readable <– expensive machines)
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6
Q

wholesale lockbox

A
  • typically B2B pmts.
  • HIGH $ VALUE / low volume
  • non-standard remittance (not machine readable)
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7
Q

hybrid (“wholetail”) lockbox

A
  • low volume
  • easy remittance (machine-readable)
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8
Q

electronic lockbox

A
  • combines and presents remittance info from electronic pmts
  • not literally a lockbox (no paper cks)
  • has many traditional lockbox reporting features
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9
Q

collection study (for lockbox selection purposes)

A
  • to determine most cost-effective collection system based on a company’s remittance data characteristics
  • uses info from remittance envelopes and ck images of checks to determine:
    • location and geographic concentration of customers and
    • location of the customers making the largest ck pmts.
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10
Q

to determine most effective city/cities for collection sites:

2 main things to consider

A
  • mail time studies (i.e. regional mail timeframes)
  • banks’ availability schedules
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11
Q

in-house processing center vs. bank lockbox

A
  • in-house center
      • more control over collection ops
      • accurate cash application by AR dept
      • can be made more effective/efficient with remote deposit capture (RDC) and increase use of electronic payment/remittance info
    • +usually CHEAPER than a lockbox…!?
  • lockbox
      • reduces mail, processing and availability float
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12
Q

letter of credit

A

a document issued by a bank, conditionally guaranteeing pmt. of a customer’s draft for a stated amt. and time.

  • subs bank’s credit for buyer’s (virtually eliminates credit risk to seller)
  • widely used for import/export shipments
  • ideal terms when dealing with new customers
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13
Q

ACH standard entry class codes: ARC

A
  • eligible cks in lockbox converted to ACH
  • must notify customer
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14
Q

ACH standard entry class codes: BOC

A
  • convert cks rcvd. at POP or manned bill pmt locations into ACH
  • display signate @ POP/premises
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15
Q

ACH standard entry class codes: CCD and CCD+

A

CCD (corp credit/debit) - basic B2B format to concentrate/disburse $

CCD+ - includes addendum record (< 80 characters of remittance info)

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16
Q

ACH standard entry class codes: CIE

A

consumers preauth. pmts via phone (bill paying svcs)

17
Q

ACH standard entry class codes: CTX

A
  • for B2B trade pmts
  • variable length addendum for remittance info
  • ASCX12 data standard compliant
18
Q

calc. example

A

opportunity cost % / 365 days = opportunity cost % per day

opportunity cost % per day x number of days float = discount to be offered

19
Q

lockbox study: 3 main factors to consider

A
  • opportunity cost of float
    • $ amt of collected items
    • total collection time for items
    • current opportunity cost of funds (e.g., ST investment or borrowing rate)
  • intercity mail times
  • bank availability schedules
20
Q

banker’s acceptance

A
  • a discounted instrument, not a coupon instrument
  • can be used to finance import, export, or domestic shipment of goods, as well as the storage of properly titled goods
  • fequently issued in conjunction with letters of credit that require a time draft
21
Q

domestic cash concentration system

A

typically xfer funds from outlying depository locations (often different banks) to a central bank account @ firm’s primary bank (typically, a concentration acct)

main objectives:

22
Q

disbursement system

A
  • include both the pmt. initiation and reconciliation.
  • improve control over:
    • Disbursements made exactly as requested by AP
    • Verify pmts accurately processed/debited from the disbursementacct.
23
Q

Remote deposit capture

A
24
Q

smart safes

A
25
Q

high-order prefix

A
26
Q

Potential benefits of image technology in remittance-processing function

A
  • lower processing costs and courier fees
  • productivity
  • accuracy
  • auto-update AR
  • better/faster customer service
  • faster lockbox discrepancy resolution
27
Q

ck imaging sevices

A
  • provides faster access to disbursement ck info
  • helps expedite approvals in “positive pay” svcs.
  • primary use is to xchange info btwn bank and its customer
28
Q

imprest account

A
  • sometimes, aka “petty cash”
  • acct. maintained at a fixed amt., for a particular purpose/activity (when needed, a HQ receives forms to fund the account, and reimburses the acct directly, to return the acct balance to its fixed, pre-determined amt.)
29
Q

banker’s acceptance (BA)

A

unconditional written order directing a bank to pay a draft (demand/ time draft), usually to finance shipment or temp. storage of goods, properly titled.

  • bank agrees to pay obligation’s face value if buyer (draft issuer/ party who drew the draft) fails to make payment
  • used frequently w/ letters of credit (L/Cs) requiring a time draft drawn on a bank
30
Q

Internet-initiated entry (WEB) payment format

A

consumers provide debit authorization for pmts. via internet.

  • single/one-time pmts or recurring
  • not a pre-authorized debit
  • not a conversion of ck to ACH

CBP'S CTP 2017 (21 decks)

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