Overdrafts (Delaying Cash outflows)

Overdrafts are also a method of slowing payment similar to zero-balance checking accounts except for the fact that in an overdraft, there is no second account from which to transfer the money. Therefore, the company has a negative balance at the bank and as a result will need to pay various penalties and/or high interest on this amount. Because of the penalties and interest, this should not be a common method used by a company to slow its payments. However, there are some services offered by banks that have the effect of offering “overdraft” privileges.