NT
OF
Concentration
Deposit 2 Bank
Types of Floats
1. Collection Float
It refers to the total time gap between
the mailing of the payment by the
payer and the availability of cash in
bank.
2. Mail Float :
It results from the time that elapse
from the mailing of cheque until it
receipt.
3. Processing Float:
Processing Availability
Mail Float
Float Float
Collection Float
MANAGING THE CASH FLOWS
The task of managing the cash flows is of two fold
i.e.
Acceleration cash collections:
Slowing Disbursements:
Avoidance of early payments
Centralized disbursements
Accruals
DESIGNING OF A COLLECTION
SYSTEM
Numbers of collection points
Location of Collection point
Customer Deposit
Availability
Delivers Made at
granted
payments Local Bank
Customer
Local Central
Deposit Information
Bank System
DESIGNING THE SYSTEM FOR
OVER THE COUNTER
COLLECTION
Types of Payment accepted
Field Office Location
Bank Compensation
Information gathering
(II) MAILED PAYMENT COLLECTION
SYSTEM
Payment Payment
mailed mailed
Deposit Deposit
Bank I Bank II
Central
Information
System
DESIGNING SYSTEM FOR MAILED
PAYMENT COLLECTION
Number of collection points
Collection point location
Disbursement
Bank II
Deposit
Bank III
OBJECTIVES FUNCTIONS OF
CASH CONCENTRATION
Centralized disbursement.
Disbursement Clearing
Cheques
Bank I System
From
Disbursement Clearing
Cheques
Bank II System
TYPES OF DISBURSEMENT
DECISIONS
Strategic Decisions
Mail Point
DISBURSEMENT TOOLS
Commercial banks and other provides offer a number of
tools and assist managers in designing efficient
disbursement system.
Taxability
Liquidity
Maturity
Yield available
MARKETABLE SECURITIES
Treasury bills
Commercial papers
Repurchase agreement
Profit=(1/4)iy-2a
THREE TRANSACTION STRATEGY
When the cash inflows is received, Initially invest
Two-Third of it. Place the remaining One-Third in
the disbursement account.
Profit=(1/3)iy-3a
NUMBER OF TRANSACTIONS
N=(iy/2a)1/2
Limited use.
THE BERANEK MODEL
Bernak hypothesized that firms where the cash
inflows were steady, but the outflows were
periodic.
R=(3av/4i)1/3