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Managing external Cash inflow and outflw Manage internal cash flows among various bank accounts or subsidiaries Objective is to speed up inflows, control outflows while minimize cost to the system |
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Financial Electronic Data Interchange payment and payment related information between buyers and suppliers is FEDI. |
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Time interval or delay between when payment is initiated and when a company receives available funds. Subject to Paper Based payment instruments that is subject to 3 types of float delays: 1. Mail 2. Processing 3. Availability |
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Time between when processing site receives the check and deposits it. Typically ONE 1 Day |
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Time between check is deposited and company's account is credited with collected funds. From 0-2 Business days. |
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Either in-house processing center or a lockbox receives and process mailed payments.
Deciding which of these methods:
Volume and Dollar amount |
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| Company Processing Center |
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Definition
Used in industries with large volume small $:
Insurance, utility companies.
Advantages:
-Make changes to system easily
-Customize for needs
-Monitor customer service
-Access info
-Update A/R
Disadvantages:
-Increased mail float no ZIP code
-Increase processing float no 1 hour drive throughs
-Increase in availability cant meet clearing deadlines |
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Definition
Reduces all three floats:
-Unique ZIP
-Mail Directly to the processor
-Able to meet the volume 24/7 and have direct access to clearing systems |
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wholesale
retail
hybrid
electronic |
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Definition
Low-volume
Large-dollar
Business to business (B2B)
Focus is on float reduction due to large $$$
detailed and non-standardized remittance docs
Customized |
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Definition
High-volume
Low-$$$
Consumer to business (C2B)
Magnetic Inc character recognition MICR processing
Optical Character recognition (OCR) reads pre-printed info
Intelligent Character recognition (ICR) reads handwritten or typed info |
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Wholesale and retail combo
process both B2B and C2B payments
Used by utilities that have oth business customers and commercial customers. |
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process ACH incoming and wire payments
Can be in combo with any lockbox. |
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| Three benefits of Electronic Payments (Process impvmnt) |
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Definition
Predictability of settlement timing and available funds
Flexibility of directing payments w/o intervention
ease of transmittence of info to update A/R |
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Term
Check Clearing for the 21st Century Act 2003 (check 21)
-Check Truncation
-IRD
-POP
-ARC |
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Definition
check truncation - converting check into digital form at the first bank that encounters the check. Shortens processing times and mail float.
IRD - image replacement document, bank can recreate the check from digital image
POP- point of purchase, many retailers convert checks to ACH debits at POP
ARC - lockboxes convert checks as well |
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Definition
Invest a larger amount of funds increase interest
Pay down debt faster reducing interest expense
Take adv of discount terms, |
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| Methods for concentration account |
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Definition
EDTs
EDTs - Electronic Depository transfers: ACH transactions that concentrate funds using National Automated Clearing House (NACHA) CCD or CCD+ formats
INEXPENSIVE and Available in one business day
FEdwires are alternative to EDT when you need to expedite funds faster. EXPENSIVE only used on large dollar amounts. |
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