Disbursement Float
Disbursement Float is the time taken from payment creation to settlement. Collection float is the sum total of time taken by Payment Float; Mail Float; Processing Float and Availability Float. Learn more!
Disbursement Float is the time it takes a company's payment to be created, mailed, received, deposited and presented to the drawee bank for settlement.
Thus collection float and disbursement float refer to the same processes and time intervals depending on point of view; one as a customer and another as a supplier.
For the company receiving a payment, collection float represents the time it takes an invoice to be prepared, to reach the customer, to receive payment and for the payment to clear the bank.
For the company making the payment, that same interval is disbursement float.Disbursement float consists of the following four components:
1. Invoicing and payment processing float includes both the time it takes the supplier to prepare and send the invoice, as well as the time the accounts payable department requires to process the invoice and create the payment.
2. Mail float is the time taken by postal or courier service to deliver the payment to the vendor.
3. Processing float is the time it takes the vendor to record the payment and deposit it into the bank.
4. Availability float is the time it takes the bank to clear the check and deduct the funds from the payee's bank balance.
Cash management focuses on shortening collection float and extending disbursement float, without impacting the positive customer and vendor relationships.
The skillful management of float contributes real bottom-line impact and benefit to the company.
Related Links
You May Also Like
-
Unravel the mystery behind clearing. Why we use clearing accounts. Find the relevance of word "Clearing" in business context.
-
Treasury has increasingly become a strategic business partner across all areas of the business, adding value to the operating divisions of the company. Managing activities that were traditionally carried out within the general finance function. Learn about the drivers for this change.
-
Introduction to Cash Clearing Process
Unravel the mystery behind clearing accounts. Learn why clearing accounts are used in finance and accounting. Learn why so many clearing accounts are defined in ERPs and Automated Accounting Systems.
-
What is Account Reconciliation?
Before you understand the Bank Reconciliation Process it is important to understand what is account reconciliation and why it is carried out.
-
The objective of Financial risk management is to protect assets and cash flows from any risk. Treasury function works to accurately assess financial risks by identifying financial exposures including foreign exchange, interest rate, credit, commodity and other enterprise risks. Learn about the various risks that are managed by treasury.
-
Many different accounts are used in finance. Understand the representation and nature of clearing account in context of accounting, finance and ERP Systems.
-
Bank Reconciliation is a PROCESS to Validate the bank balance in the general ledger With Bank Statement. Learn the bank recon process.
-
Before we dive into cash management, let us fist understand what we mean by cash and what constitutes cash in context of cash management process.
-
So many codes in the lines that are there in a Bank Statement. It contain lots and lots of meaningful information that can help automated many tasks. Explore more!
-
What are the various sources of cash in an organization. Which sources increase the cash available with the enterprise and which sources results in outflow of the cash? Let us explore!
