Cash Concentration Strategies Topic of discussion •Definition of Cash concentration •Concentration banks •Concentration mechanism •Frequency of transfer PowerPoint Presentation By : Md. Sifat Hasan Studying Finance And Banking, Jatiya Kabi Kazi Nazrul Islam University. Information Collected From: Modern Working Capital Management, Frederick C. Scherr)
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Cash Concentration Strategies
Topic of discussion
•Definition of Cash concentration
•Concentration banks
•Concentration mechanism
•Frequency of transfer
PowerPoint Presentation By : Md. Sifat Hasan
Studying Finance And Banking, Jatiya Kabi Kazi Nazrul Islam University.
Information Collected From: Modern Working Capital Management, Frederick C. Scherr)
What is cash concentration ? The process of controlling funds is called cash concentration.
Depository or lockbox banks A system, from where a regional bank collects payments on behalf of a company
Regional concentration banks A bank that concentrate payments in a limited areas of the country.
Central banks A bank where all the concentrate payments are finally stored.
Concentration mechanism •Depository transfer cheque •Automated Clearing House(ach) electronic transfer•Wife transfer
Depository transfer cheque •Instruct one bank to send funds to another bank by old cheque method •Cost: less than $1 •Availability: one or two days
ACH electronic transfer •It is an electronic version of transferring calque •Cost: less than $5•Availability: 1 days
Wire transfer •This instant electronic message system between banks •Cost: $ 10•Availability: same day
Frequency of transfer •Schedule of transfer •Trigger transfer •Anticipated transfer
Schedule transfer The firm decides on a predetermined time pattern of transfers from the depository bank to the concentrate bank. •Advantage : transfer system is very simple. •Disadvantage: uneconomically small amount of fund may be made
Trigger point transfer •Avoid the transfer of small amount by basing the transfer decision on account balance rather than on timing.
Anticipated transfer It is the method of decreasing the float within the transfer process. In this method the transfer are launched based on anticipated balance on the depository bank.