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Unformatted text preview: egularly by the firm’s bank, who
processes the payments and
deposits them in the firm’s
account. This system speeds up
collection time by reducing
processing time as well as mail
and clearing time. Working Capital and Current Assets Management 621 until the firm mails its payment and (2) the receipt, processing, and collection
time required by the firm’s suppliers. The receipt, processing, and collection time
for the firm, both from its customers and to its suppliers, is the focus of receipts
and disbursements management. Float
Float refers to funds that have been sent by the payer but are not yet usable funds
to the payee. Float is important in the cash conversion cycle because its presence
lengthens both the firm’s average collection period and its average payment
period. However, the goal of the firm should be to shorten its average collection
period and lengthen its average payment period. Both can be accomplished by
Float has three component parts:
1. Mail float is the time delay between when payment is placed in the mail and
when it is received.
2. Processing f...
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