Chapter 2 Cash Transfer Methods Flashcards
made on a paper document, which has traditionally been
physically routed from the payer to the payee, to the payee ’s bank, and then back to the payer ’ s bank.
check payment
made on a paper document, which has traditionally been
physically routed from the payer to the payee, to the payee ’s bank, and then back to the payer ’ s bank.
check payment
The vast majority of checks are issued directly by companies. However, they may also be issued directly by a bank
a bank check or bank draft
first, there is a delay while the payment is delivered through the postal service,
mail float
Second, the supplier must deposit the check at its bank; the time from when the supplier receives the check and deposits
processing float.
Third, the time between when the check is deposited and when it is available to the recipient. No longer than 2 days
availability float
The time between when the check is deposited and when it is
charged to the payer ’ s account
presentation float
The combination of the floats associated with these inbound and outbound check payments
net float
When a company has written a large volume of checks that have not yet
cleared, the available cash balance shown by the company ’ s bank will be
larger than the company ’ s ledger balance. If the treasurer can reliably
predict how long it will take for the checks to clear, it is then possible to
invest some of the cash that is available due to uncleared checks.
Investing Float - Related Funds
is the presumed date of receipt of the cash by the bank. Once the value date is reached, the payee has use of the funds. The value date may also be categorized by a bank as 1 - day float, 2+ - day float, or some similar term
Value Dating
bank assigns a mailbox address to the company, which forwards this information to its customers. The customers
mail their checks to the lockbox, where the bank opens the envelopes, scans all checks and accompanying documents, deposits the checks, and makes the scans available to the company through a web site.
a lockbox service.
allows a company to avoid the physical movement
of received checks to its bank. Instead, one can use a special scanner and scanning software to create an electronic image of each check, which it then transmits to the bank. The bank accepts the online image, posts it to the company ’ s account, and assigns funds availability based on a predetermined
schedule.
Remote Deposit Capture
The fl oat concept can also be applied to a company ’ s payments. The key area that can be lengthened is the presentation float. A check written on a New York or Chicago bank will likely have a minimal lapse of a day or so
before it is presented for payment. However, if a check is written on a bank in a remote location, such as Montana or Idaho, presentation may require several additional days, all of which allow a company to continue using its cash during that time.
Remote Disbursement
sends funds to the recipient ’ s bank account more rapidly
than any other form of payment, and is the standard form of international payment.
WIRE TRANSFERS
an electronic network for the processing of both credit and
debit transactions within the United States and Canada. ACH payments include direct deposit payroll, Social Security payments, tax refunds, and the direct payment of business - to - business and consumer bills
ACHPAYMENTS Automated Clearing House