Speeding cash inflows
A Company should always endeavor to receive its cash payments as soon as possible in order to maximize its cash management position.
Any action that reduces float frees funds for the company to use, thereby increasing profitability.
The freed funds are the firm’s average daily collections times the number of days that float is reduced.
The following measures can help to expedite cash inflows and minimize collection float (the collection of receivables)
1- Lockbox system
3- Decentralized collections : It means establishing multiple collection centers throughout the country .
4- Initiating controls to accelerate the deposit and collection of large checks
5- Automated – clearinghouse (ACH) electronic funds transfer (EFT)
6- Credit cards :(Visa, MasterCard and American Express, for example) can be used as an alternative method of speeding up collection rates. The bank that issued the card charges the seller a fee equal to 1% – 3% of a charge sale, but the funds are instantly available to the seller when a buyer uses a credit card. The responsibility for collection has been transferred to the credit card in exchange for the fee that they charge
7- Using Electronic-Data Interchange [EDI] accompanied by EFT