Chapter 12 - Disbursements, Collections, and Concentration Flashcards
Controlled Disbursement
Checks are presented early in the morning (same-day) so the company has a clear understanding of how much funding is required
If a controlled disbursement account is held at a bank other than where cash is concentrated, is ACH an acceptable means of transferring funds?
(what may the bank require instead?)
While ACH funding can be negotiated, they will usually require an account at the same bank or via wire
The bank may require a balance equivalent to an average day’s clearing or line of credit
What is the downside to using a controlled disbursement account?
Discrepancies and same-day presentment can cause funding amounts to be inaccurate
Prefect Presentment
Discrepancies encountered in one day are carried forward to the next day
Minimizes variances caused in trying to set the cash position
Imprest Account
Account maintained at a fixed amount for a particular purpose or activity
May be used as petty cash
Can local regulation impact how DDAs are used and how cash is used?
Yes, regulations vary
Some banks will not pay interest on surplus cash held in DDAs
What is one of the significant advantages that electronic disbursements provide?
Include remittance information with the B2B payments
Two advantages of direct deposit via ACH
Cost-effective
Certainty of timing
Does NACHA have a standard format for ACH tax payments?
Yes
tax payment (TXP) banking convention
EFTPS
Electronic Federal Tax Payment System
Standing Wires
Repetitive transfer instructions are established to move funds between two specified accounts automatically when previously determined criteria are met
Useful for concentrating funds
All outsourcing decisions have what type of implications?
Tax implications
Freight Payments
(outsourced disbursement service)
Specialists will pay freight bills, audit bills, and overcharges
Provide reports so company can decide what is most efficient
Why do many small to medium sized companies outsource payroll?
It is more cost effective to do so
Two Approaches to Integrated/Comprehensive Accounts Payable Outsourcing
- Send a date file to the FSP with list of payments to be made
- FSP maintains a database of a firm’s payees that includes detailed information
* Company sends limited information to the FSP for disbursements
Can Integrated/Comprehensive Accounts Payable Outsourcing be involved in onboarding suppliers?
Yes
Payment Factory
Single term used for a wide variety of operating structures aimed at centralizing a company’s disbursements
Benefits of Payment Factories
(review)
- Greater control of disbursements
- Minimizes the number of bank accounts
- Reduces transaction fees
- More effective deployment of working capital
- Linked to multilateral or re-invoicing programs
- Pay On Behalf Of (POBO)
Challenges with a collections factory
Need to ensure customers from a variety of areas can easily make payments
Three Broad Elements for Fraud Protection Framework
Collaborating with partners
Adopting robust processes, controls, and audit trails
* Segregation of duties and individual limits
* Timely confirmation and reconciliation of transactions
* Each transaction has a clear audit trail that can be reviewed
Educating employees
Payee Match Positive Pay
Additional layer of security for positive pay that ensure no changes have been made to the payee in an attempt to deter fraud
Teller Positive Pay
Tellers are able to review in real-time if the check should be cashed/deposited
Is it typical to setup accounts with a default status for positive pay?
Yes
Pay All or Return All
Positive Pay vs. Reverse Positive Pay
Positive Pay: Bank receives file and sends exceptions
Reverse Positive Pay: Bank sends file to company to decision
