1.
CASH FLOAT
Prepared By
Mr. Binu Jose
MBA 4th Semester, MACFAST College
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2.
CONTENTS
• Concept of Cash Float
• Different types or components of float
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3.
What is Float?
• Bankers define floats as cash obligation that are
in the process of collection.
• In simple words, Float is the difference
between the cash balance appear in the
passbook and that appear in the firm’s book.
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4.
COmpONENTS/TypES OF FLOAT
FLOAT – Difference between cash
and bank records on account of
non clearing of cheques.
NEGATIVE FLOAT - POSITIVE FLOAT –
Related to Bills Receivable Related to Bills Payable.
Collection Float Disbursement /Payment Float
• Invoicing Float •Mail Float
•Mail Float • Processing Float
• Processing Float •Collection Float
•Collection Float
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5.
Negative Float-Collection Float
• It occurs when the firm receive payments.
• It is undesirable for a firm and it should be
minimized.
• Collection float is the time which elapses between
the time a payer deduct a payment from its accounts
ledger and the time when the payee actually receives
the funds in actual form.
Collection Float = Invoicing Float + Mail Float+
Processing Float+ Clearing Float
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6.
Four types of Collection Float
1.Invoicing Float
• Invoicing float is the time it takes for a firm to
bill receivables.
The efficiency of the
The efficiency of the
Effect of
company’s internal
company’s internal Invoicing
accounting and
accounting and Float
billing procedures
billing procedures
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7.
2. Mail Float
Mail Float is the time the firm’s bill spends in the
mail on its way to the customer and the time the
customer’s cheque spend in the mail on its way
to the firm.
Bill
Firm Customer
Cheque
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8.
3.Processing Float
When the firm’s office get the cheque and if
the office machinery is lax, the cheque is
deposited with the bank not on the same day
but the next day.
It is the time between a firm’s receipt of a payment and
It is the time between a firm’s receipt of a payment and
its deposit of the cheque for collection
its deposit of the cheque for collection
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9.
4. Clearing Float
• It is the time from when the bank accept a
cheque for deposit to when it makes the funds
available in the firms account
Bank Firm
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10.
Collection Float
Customer Mail the
cheque
Mail Float
Company receive the
cheque
Processing Float
Company deposits
the cheque
Clearing Float
Bank process and
clear the cheque
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11.
Positive Float- Disbursement /payment Float
• Positive Float occurs when the firm makes the
payment
• It allow the firm to maintain a control over the cash
for a long period of time.
Disbursement Float is the time between when a firm
writes a cheque on available bank account fund and
when the bank deduct the corresponding amount
from the bank balance.
Delay in Time for Supplier- Cash
Firm – Credited to his
disbursement of
Issue Cheque cash bank account
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12.
Disbursement/Payment Float
Company Mail the
cheque to Supplier
Mail Float
Supplier receive the
cheque
Processing Float
Supplier deposits the
cheque
Clearing Float
Bank process and
credits Supplier's
account
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13.
Net Float
• Difference between Payment Float and
Receipt Float
Net Float= Disbursement Float - Collection Float
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14.
Thank you!
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