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Cash concentration strategies
- 1. Cash Concentration Strategies Topic of discussion •Definition of Cash concentration •Concentration banks •Concentration mechanism •Frequency of transfer PowerPoint Presentation By : Md. Sifat Hasan Studying Finance And Banking, Jatiya Kabi Kazi Nazrul Islam University. Information Collected From: Modern Working Capital Management, Frederick C. Scherr)
- 2. What is cash concentration ? The process of controlling funds is called cash concentration.
- 3. Concentration banks •Depository or lockbox banks •Regional concentration banks •Central concentration banks
- 4. Depository or lockbox banks A system, from where a regional bank collects payments on behalf of a company
- 5. Regional concentration banks A bank that concentrate payments in a limited areas of the country.
- 6. Central banks A bank where all the concentrate payments are finally stored.
- 7. Concentration mechanism •Depository transfer cheque •Automated Clearing House(ach) electronic transfer •Wife transfer
- 8. Depository transfer cheque •Instruct one bank to send funds to another bank by old cheque method •Cost: less than $1 •Availability: one or two days
- 9. ACH electronic transfer •It is an electronic version of transferring calque •Cost: less than $5 •Availability: 1 days
- 10. Wire transfer •This instant electronic message system between banks •Cost: $ 10 •Availability: same day
- 11. Frequency of transfer •Schedule of transfer •Trigger transfer •Anticipated transfer
- 12. Schedule transfer The firm decides on a predetermined time pattern of transfers from the depository bank to the concentrate bank. •Advantage : transfer system is very simple. •Disadvantage: uneconomically small amount of fund may be made
- 13. Trigger point transfer •Avoid the transfer of small amount by basing the transfer decision on account balance rather than on timing.
- 14. Anticipated transfer It is the method of decreasing the float within the transfer process. In this method the transfer are launched based on anticipated balance on the depository bank.
- 15. The end