Reverse positive pay
- bank transmits a file of the cks presented for payment (daily/intraday basis)
- within a specified time, company reviews and approves cks bank may process
- does not apply to ACH– only paper cks
“pay none” or “pay all” terms: pay/reject all cks not approved in time
formula: average daily float
= total “dollar-days” of float in a given period of time / # of days in the period
formula: annual cost of float
(aka “is the opportunity cost of funds”)
= average daily float x opportunity cost of funds %
documentary collection (info disclosed)
info disclosed:
- info regarding collecting bank– not remitting bank
- date, tenor and value of the collection
- details of bank and other charges to be paid by the exporter, importer, or both
- recourse procedure in the event of a nonacceptance or nonpayment
retail lockbox
- typically C2B
- HIGH VOLUME
- easy remittance (machine-readable <– expensive machines)
wholesale lockbox
- typically B2B pmts.
- HIGH $ VALUE / low volume
- non-standard remittance (not machine readable)
hybrid (“wholetail”) lockbox
- low volume
- easy remittance (machine-readable)
electronic lockbox
- combines and presents remittance info from electronic pmts
- not literally a lockbox (no paper cks)
- has many traditional lockbox reporting features
collection study (for lockbox selection purposes)
- to determine most cost-effective collection system based on a company’s remittance data characteristics
- uses info from remittance envelopes and ck images of checks to determine:
- location and geographic concentration of customers and
- location of the customers making the largest ck pmts.
to determine most effective city/cities for collection sites:
2 main things to consider
- mail time studies (i.e. regional mail timeframes)
- banks’ availability schedules
in-house processing center vs. bank lockbox
- in-house center
- more control over collection ops
- accurate cash application by AR dept
- can be made more effective/efficient with remote deposit capture (RDC) and increase use of electronic payment/remittance info
- +usually CHEAPER than a lockbox…!?
- lockbox
- reduces mail, processing and availability float
letter of credit
a document issued by a bank, conditionally guaranteeing pmt. of a customer’s draft for a stated amt. and time.
- subs bank’s credit for buyer’s (virtually eliminates credit risk to seller)
- widely used for import/export shipments
- ideal terms when dealing with new customers
ACH standard entry class codes: ARC
- eligible cks in lockbox converted to ACH
- must notify customer
ACH standard entry class codes: BOC
- convert cks rcvd. at POP or manned bill pmt locations into ACH
- display signate @ POP/premises
ACH standard entry class codes: CCD and CCD+
CCD (corp credit/debit) - basic B2B format to concentrate/disburse $
CCD+ - includes addendum record (< 80 characters of remittance info)
ACH standard entry class codes: CIE
consumers preauth. pmts via phone (bill paying svcs)
ACH standard entry class codes: CTX
- for B2B trade pmts
- variable length addendum for remittance info
- ASCX12 data standard compliant
calc. example
opportunity cost % / 365 days = opportunity cost % per day
opportunity cost % per day x number of days float = discount to be offered
lockbox study: 3 main factors to consider
- opportunity cost of float
- $ amt of collected items
- total collection time for items
- current opportunity cost of funds (e.g., ST investment or borrowing rate)
- intercity mail times
- bank availability schedules
banker’s acceptance
- a discounted instrument, not a coupon instrument
- can be used to finance import, export, or domestic shipment of goods, as well as the storage of properly titled goods
- fequently issued in conjunction with letters of credit that require a time draft
domestic cash concentration system
typically xfer funds from outlying depository locations (often different banks) to a central bank account @ firm’s primary bank (typically, a concentration acct)
main objectives:
disbursement system
- include both the pmt. initiation and reconciliation.
- improve control over:
- Disbursements made exactly as requested by AP
- Verify pmts accurately processed/debited from the disbursementacct.
Remote deposit capture
smart safes
