Float funds that have been sent by the payer but are

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Unformatted text preview: ipts and disbursements, the financial manager, who is probably a generalist, needs to rely on the expertise of the commercial banker for the firm’s most cost-effective means of managing cash. float Funds that have been sent by the payer but are not yet usable funds to the payee. mail float The time delay between when payment is placed in the mail and when it is received. processing float The time between receipt of a payment and its deposit into the firm’s account. clearing float The time between deposit of a payment and when spendable funds become available to the firm. Hint One method of accelerating the collection of accounts receivable is to let someone else do the financing for you, such as by using bank credit cards or selling accounts receivable to a third party at a discount. Another method is to change the credit terms: Increase the cash discount and shorten the required payment period. lockbox system A collection procedure in which customers mail payments to a post office box that is emptied r...
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