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Cash concentration strategies

Definition of Cash concentration
Concentration banks
Concentration mechanism
Frequency of transfer
Depository or lock-box banks
Regional concentration banks
Central concentration banks

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Cash concentration strategies

  1. 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. 2. What is cash concentration ? The process of controlling funds is called cash concentration.
  3. 3. Concentration banks •Depository or lockbox banks •Regional concentration banks •Central concentration banks
  4. 4. Depository or lockbox banks A system, from where a regional bank collects payments on behalf of a company
  5. 5. Regional concentration banks A bank that concentrate payments in a limited areas of the country.
  6. 6. Central banks A bank where all the concentrate payments are finally stored.
  7. 7. Concentration mechanism •Depository transfer cheque •Automated Clearing House(ach) electronic transfer •Wife transfer
  8. 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. 9. ACH electronic transfer •It is an electronic version of transferring calque •Cost: less than $5 •Availability: 1 days
  10. 10. Wire transfer •This instant electronic message system between banks •Cost: $ 10 •Availability: same day
  11. 11. Frequency of transfer •Schedule of transfer •Trigger transfer •Anticipated transfer
  12. 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. 13. Trigger point transfer •Avoid the transfer of small amount by basing the transfer decision on account balance rather than on timing.
  14. 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. 15. The end

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  • SifatHasan2

    Oct. 6, 2017
  • ShemaIvan

    Nov. 20, 2019

Definition of Cash concentration Concentration banks Concentration mechanism Frequency of transfer Depository or lock-box banks Regional concentration banks Central concentration banks

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