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
-
Suspense and clearing accounts resemble each other in many respects but there exists important fundamental difference between the two. Read more to explore these differences.
-
Why enterprises need cash management. What is the purpose of having a well defined cash management process?
-
The terms Treasury Management and Cash Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger and includes funding and investment activities as well. Learn all about Treasury Management here!
-
Collection Float is the time spent to collect receivables. Collection float is the sum total of time taken by Invoice Float; Mail Float; Processing Float and Availability Float. Explore more!
-
The Cash Management component ensures that the enterprise has sufficient liquidity for payments that are due and to monitor payment flows. Learn how treasury plays an important role in cash management for the enterprise.
-
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.
-
Unravel the mystery behind clearing. Why we use clearing accounts. Find the relevance of word "Clearing" in business context.
-
Introduction to Bank Reconciliation Process
These set of articles provide a brief introduction to Bank Reconciliation Process. This topic not only discusses the meaning of bank reconciliation process but also discusses how this process in handled in new age ERPs and Automated Reconciliation Systems.
-
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!
-
Bank reconciliation process is targeted to validate the bank balance in the general ledger and explain the difference between the bank balance shown in an organization's bank statement. Learn the reasons for existence of differences between the two.
