Summary
January 5, 2009 – 7:37 amConcentration systems are designed to mobilize cash in bank accounts for the benefit of the business: to fund disbursements, repay loans, or invest. However, funds mobilization is undergoing significant changes with the Interstate Banking and Branching Efficiency Act (see Chapter 8), making it possible to concentrate funds in one step by collecting through the branches of a single bank network.
Appropriate disbursement mechanisms must be selected for the entire disbursement cycle—purchasing, accounts payable, and payment issuance—in the context of cost, convenience, control over possible fraud, and access to bank systems. The outsourcing of portions of the disbursement process has become a viable and economic alternative to the traditional check-writing function. The transformation of disbursement systems from paper to electronic is occurring, although somewhat slowly, with the most notable use being the direct deposit of payroll.
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After hearing a presentation from their bankers, Ann and Bill realized the extent of their exposure to fraud by not using positive pay. They also became aware of the inherent inefficiencies of their decentralized disbursement system. Of the 5,000 disbursement checks issued each year, about half were to vendors, with the other half for payroll. While some direct deposit was used, efforts to encourage greater acceptance had been nominal. As the result of their analysis, Ann and Bill resolved to:
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Consolidate concentration banks to a single bank network. This action would remove idle balances in collection accounts, reduce the volume of funds transfers, eliminate some bank fees, and strengthen credit and cash management links to one financial institution.
Taken From : Essentials of Managing Corporate Cash
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