Study on Cash Collection and Cash Disbursement

647 Words Feb 3rd, 2018 3 Pages
How would you go about managing both aspects of the short-term cash management of a company? Be as specific as possible. Write a paper outlining your approach. Use a bank as an example.

Cash collecting and cash disbursement are two important concepts for a company that have to be done correctly for the company to function effectively.
To explain how I would go about managing both aspects of the short-term cash management of a bank, I will explain some of the concepts involved in the cash collection and cash disbursement areas of cash management whilst showing how they are related

Float
In both instances of cash collection and disbursement float is an important concept an intrinsic to the process. Float can best be explained as the difference between the balance of money that has entered into the bank's ledger book and the balance of money that the bank will record in its final financial report/ statement namely that which it has at the end of the day.
Using another kind of business as better instance, a person may decide to buy something; the business records the transaction and the sale. The person may not, however, actually, pay at the end.

There are two kinds of float:
Disbursement float
This is when the company e.g. the bank provides a check (or in the case of the bank provides a loan)

Collection float
This is when the company (e.g. bank) gets a…

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