Financial Management: Core Concepts, Third Edition

13.3 The Float

When individuals or companies use a checking account to make payments or receive payments from customers, there is a time delay between when they write the check and when funds are available to the payee. We call the lag time involved in the process of clearing a check the float. The float also represents the difference between the cash balance on the company’s books and the cash balance in its bank account. It is the same difference that you see between your bank account balance and your checkbook balance: there is often a difference between what the bank says you have and what your checkbook says you have. Although a law called the Check Clearing for the 21st Century Act, or Check 21 (passed in October 2003; effective October ...