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
-
Technology has enabled the treasury function by providing various solutions to manage it's complicated tasks. This article explains various types of treasury management systems available in the market.
-
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 is Invoice to Cash Process
In this article, we will explore the business process area known as; Invoice to Cash; Also known as I2C. Learning objectives for this lesson are: Meaning of Invoice to Cash Process; Sub Processes under Invoice to Cash; Process Flow for Invoice to Cash; Key Transactions Fields; Key Setups/Master Data Requirements.
-
Learning objectives for this lesson are: Meaning of Order to Cash Process; Sub Processes under Order to Cash; Process Flow for Order to Cash; Key Roles & Transactions; Key Setups/Master Data Requirements.
-
Complete Bank Reconciliation Process
Bank Reconciliation Process is a eight step process starting from uploading the Bank Statement to finally posting the entries in General Ledger. Learn the Eight Steps in Detail!
-
How the inflow and outflow of cash is linked to the operating cycles of the business? Learn the cash management process in an enterprize and it's key components.
-
Account Reconciliation – How? Learn the three key attributes to perfom account reconciliation.
-
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!
-
Have you ever wondered what is actually a Bank Statement and why it is needed. What is the information that is available in a bank statement?
-
Bank Reconciliation is a PROCESS to Validate the bank balance in the general ledger With Bank Statement. Learn the bank recon process.
