REPORT (Treasuty MGT)

Chapter 2
Cash Transfer
Methods
Check Payments
 Are made on a paper documents which has traditionally been physically routed the payer to
payee, to the payee’s bank, and then back to the payer’s bank.
 Bank Check or Bank drafts
 Mechanics of a Check Payment
- Main Float
- Processing Float
- Availability Float
- Presentation Float
- Net Float
- Investing Float
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Check Payments
Value Dating Check Payments through a Lockbox
 Is a future date used in  Lockbox banking is a service provided by banks to
determining the value of a companies for the receipt of payment from
product that fluctuates in customers.
price
 Under the service, the payments made by the
 Is the presumed date of the customers are directed to a special post office box
receipt of the cash by the instead of going to the company. The bank goes to
bank the box, retrieves the payments, processes them
and deposits the funds directly into the company’s
bank account.
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Check Payments
Remote Deposit Remote Wire Transfers

 Capture
A technology-based  Disbursement
A cash-management  Sends funds to the
method that lets banks technique that some recipient’s bank account
accept checks for deposit businesses use to more rapidly than any
using electronic images increase their float of form of payment and is the
instead of the original, the central bank’s check standard form of
physical, paper versions. clearing inefficiencies international payment
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ACH Payment
An electronic payments for the processing of both credit and debit transactions through
the Automated Clearing House (ACH) Network
▧ Common Uses includes:

• Direct deposit payroll
• Social Security payments
• Tax refunds
• The direct payment of business-to-business
• Consumer bills
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ACH Payments
ACH Debits Global ACH Payments
 An ACH debit allows a payee  The existing Global ACH payment system
to initiate a debit of the payer’s is not perfect.
bank account, with the funds
shifting into the payee’s bank
account. Here are two limitations that are of particular
concern:
1. Limited coverage
2. Limited remittance information
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Letters of Credit
 An arrangement where the importer’s bank (the issuing bank)
formally authorizes an obligation to pay the exporter’s bank during a
specific period of time, assuming that several documented conditions
have been met.
Procurement
 Cards
A company can make smaller – scale payments with a procurement
card program. This can involve the use of debit cards, which deduct
cash directly from a company’s bank account, but more commonly
employ credit cards.
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Comparison of Bank Fees for Cash Transfer
Methods
Initiator Charged Recipient Charged Fee Size
ACH Low
Bank Check Medium
Company Check Low
Letter of Credit Medium
Procurement Card Medium
Wire Transfer Large
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Cash Transfer Control
 Cash transfers can subject a company to a considerable risk of loss and require a
broad array of controls which may vary considerably by transfer method.
Controls for Check Payment Controls for Remote Deposit Capture

 This control system for check payments  This eliminates the need to physically transfer
assumes that a fully documented packet of check payments to the local bank for deposit.
payables information has already been However, the replace process of converting
created which contains receiving, purchase the checks to an electronic format still
order and supplier invoice information. requires some controls
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Cash Transfer Controls
Controls for Electronic Payments
Controls for Letters of Credit
 Electronic payments can involve large  The greatest risk with a letter of credit is not
amounts of money and require a being paid. The documents that a payee must
stringent set of controls to mitigate the present in order to be paid are usually
risk of loss. prepared and controlled by other parties and
terms of those documents may be vary
strictly defined thereby delaying payment.
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Cash Transfer Controls
Controls for Procurement Cards
 The first control calls for card users to itemize each of their purchases in a separate log
which they can reconcile against the monthly card statement, nothing missing receipts
and rejected line items as part of the reconciliation. They then assemble this information
into a packet of receipts and forms and have a supervisor review it for inappropriate or
split purchases who then forwards the packet to the accounts payable department for
payment.
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Cash Transfer Policies
 The policies in this section are used to designate a preferred form of funds transfer and to
define the authorizations for various transfers. They are as follows:
1. The preferred method of payment by ACH transaction
2. The preferred method of payment of amount less than $ by
procurement card
3. The employees authorized to sign a checks and approve electronic payments
shall be reviewed at least annually.
4. All wire transfers greater than $ must be approved by an authorized employee
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Chapter 2

Remote Deposit Remote Wire Transfers

▧ Common Uses includes:

Initiator Charged Recipient Charged Fee Size

Bank Check Medium

Company Check Low

Letter of Credit Medium

Procurement Card Medium

Wire Transfer Large

Controls for Check Payment Controls for Remote Deposit Capture

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