Working Cash Management

6 Pages 1418 Words

float. Since checks are received, book balances
increase, but there is still no change in the available balances. “In general a firm’s payment
(disbursement) activities generate disbursement float, and its collection activities generate
collection float. The net effect, that is, the sum of the total collection and disbursement
floats, is the net float” (Jordan, 2001, p.480). Net float can be positive or negative. If the
net float is negative, the collection float exceeds the disbursement float and the corporation
has a net collection float. In managing float, a company wants collection faster and
disbursement slower. A company must reduce or increase mailing time, processing delay,
and availability delay to achieve this goal. “Float management is a continually changing,
price-sensitive environment that requires detailed information and environment that requires
detailed information and stringent control over float and item processing systems. To
rema...